Indeed, U.S. small businesses increased their staff levels by 0.27 percent in September. The SurePayroll Hiring Index ended the month at 11,188, a 30-point increase from August.

For the entire Third Quarter, small business hiring was up 1.1 percent. Year to date, small business hiring is up 2.7 percent nationwide.

This is consistent with all the other national labor statistics that are available from the Bureau of Labor Statistics and other public and private sector data sources: to the extent there is any job growth in the economy right now, it is coming from small business.

Salaries Still Declining

Dropping salaries have made it easier for small business owners to hire new employees. In fact, salaries declined by 0.51 percent in September. That's the largest one-month drop in the national average small business salary that SurePayroll has seen.

The SurePayroll Hiring Index clocked in at in September at 1,042, dropping 5 points. The average annualized small business salary for a U.S. employee now stands at $32,182.39.

In the Third Quarter, salaries dipped 1.1 percent. Year to date, salaries have declined 1.8 percent.

In summary, it's a bad time to be unemployed. If you can get a job, the odds are it will pay less than your last job, even if it's exactly the same work. However, if you are an employer looking to hire a new employee, good news -- it's a buyers' market.

Independent Contractors Gain in Popularity

Use of contractors was up 1.05 percent last month. This is a trend SurePayroll has been watching closely, and it appears that small business owners are getting more reliant on contractors.

The SurePayroll Contractor Index ended September at 3.64 percent, up from 3.61 percent in August.

When the Contract Index is 3.64 percent that means that for every 100 workers engaged by small businesses in September, 3.64 are 1099 independent contractors and 96.36 are W2 employees.

Small business owners that lean more on contractors now than in the past are effectively saying: "I'm hedging my bets. I'm not willing to invest in full-time employees, and I'd love to save a little money on benefits and employer payroll taxes."

What's Around the Corner for the Nation's Small Businesses

Given the low optimism levels out there, it's clear that small businesses are bracing for the impact of this storm.

There are four key factors to consider:

1. Cash is king. Small business owners are seeing access to credit drying up and the time it takes to collect receivables is elongating as large businesses play the "pay late, collect early" cash flow game. Many small business owners that don't have a cash cushion may be hit hard by this economic crisis.
2. Consumer sentiment is a wildcard. Although consumer sentiment made a small rebound recently, consumer confidence is near a historic low point. If the consumers don't spend this holiday season, it will be game over for many retailers and manufacturers.
3. Inflation kills. For a small business owner, everything except for labor costs is costing more these days. This is going to force small business owners into a dangerous gambit in which many will have to raise their own prices. Will demand shrivel up? That's the $700 billion question.
4. Retired workers won't retire. An interesting artifact of this current economic situation is that retiring workers will be forced to stay in the workforce. With retirement savings tied to a falling stock market, they have no choice. This will increase the supply of labor in the market, further eroding salaries. Again, great for small business owners but bad news for small business employees.