The Bright Side

SurePayroll's March hiring index hit 10,558, up 0.45 percent from February and up 1.11 percent from the end of 2006. This suggests a strong year for small-business job growth, Alter says.

Salaries continued a 19-month upward trend, as the index rose to 1,034 in March. But the increase was just 0.2 percent, reaching an average annual salary of $31,971. "People are hiring, and they're not paying that much more," says Alter. "That's pretty good." 

Another positive sign was a slight decline in the rate of contractor use, "which means small businesses are more confident in the economy and willing to take on the burden of employees," Alter says.

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SurePayroll's survey of its customers found that a strong majority were optimistic about the small-business economy but were beginning to experience a labor shortage, with twice as many reporting they were paying more for employees in March 2007 than in March 2006. They remained concerned about issues such as the rising cost of health insurance. But generally, the first quarter represents a big turnaround. "We were very pessimistic about the small-business economy a quarter ago," Alter says. "I've swung 180 degrees based on the data from our customers."