For clue to U.S. jobs recovery, watch small biz

NEW YORK (Reuters) - One of the earliest hints that the U.S. jobs market is turning the corner may come from the corner shop.

Before any eventual pickup in jobs creation, surveys of small business sentiment are likely to show a rebound in confidence, employment experts predict. However, they caution that any recovery is probably many months away, after another dismal monthly employment report.

The U.S. economy shed 598,000 jobs outside the farm sector in January, the largest one-month loss in 34 years, the Labor Department said on Friday. The unemployment rate jumped to 7.6 percent.

With small businesses historically accounting for the bulk of job creation in the United States, small business owners will be crucial to the recovery. Right now they are gloomy.

The National Federation of Independent Business said last month a longer-than-usual recession is likely sending its index of optimism to its second-lowest level in 35 years.

This week, a survey of small business owners by SurePayroll Inc, which processes paychecks for 20,000 businesses, found 70 percent are optimistic, up from a month earlier but well below typical survey results. Usually, more than 90 percent say they are optimistic, reflecting the glass-half-full attitude of many entrepreneurs, said Michael Alter, president of SurePayroll.

If those numbers rise and stay up, it will signal hiring around the corner.

"The thing that will drive (hiring) is a boost in optimism about the economy among small businesses," Alter said. "I'm very hopeful the Obama administration will put something in the stimulus to actually drive jobs growth. If you give money to a small business owner, they will put it right to work buying new equipment or hiring employees."

Small businesses led hiring when the economy recovered after the last three recessions, Alter argues. That is not happening now because there is little capital for start-ups or expansions, and entrepreneurs cannot tap usual sources like their 401(k) retirement plans or home lines of credit.

"We just put 600,000 people on the street this month," Alter said. "The next few months are not good."

MORE FLEXIBILITY

For those small businesses looking to hire, the recession provides a measure of flexibility not available before, including a large pool of applicants, and the chance to offer lower pay.

For example, RealMatch.com, an online site that matches applicants to jobs based on profiles, reports a 14-percent increase in part-time job listings in the past 60 days. This means employers are shifting some financial risk to employees, said Rafael Consentino, vice president of RealMatch.com.

"The salaries are smaller, the commission structure is larger, they're offering part-time work, (and) they're not offering guaranteed severance packages and bonuses," Consentino said.

Meanwhile, rising productivity suggests people are working harder to keep the jobs they have, and salaries are down.

More people are returning to the workforce, such as full-time parents now needing to make ends meet; more part-timers are looking for full-time work; and Baby Boomers hit by shrinking savings are delaying retirement.

To be sure, unlike after past recessions, small businesses may not spark job creation in the next upswing if fewer new businesses are being created, experts caution.

They point out start-up capital is scarce, and many would-be entrepreneurs are unwilling to leave their jobs, fearful the job will not be there if they need to return. Giving up corporate health insurance also keeps people from venturing out on their own.

STIMULUS HOPES

A stimulus could help.

"It will be essential that the (stimulus) programs directly increase consumer confidence," said Tig Gilliam, CEO of Adecco Group North America.

Spending on infrastructure, energy and technology would stimulate construction or manufacturing jobs, but could also lift demand for engineers and health care and other professionals, Gilliam said.

Such prospects helped lift staffing industry stocks on Friday, amid hopes the dire January employment report will make a government stimulus package more urgent.

Manpower Inc was up almost 6 percent in afternoon trading, Robert Half International Inc gained 4.5 percent and Monster Worldwide Inc jumped 5 percent, all on the New York Stock Exchange.

A good stimulus plan could boost small businesses through tax breaks, or by mandating that banks receiving bailout money lend more capital to such businesses, SurePayroll's Alter said.

"When you look at large businesses that we've given money to so far, what have we gotten? New executive jets, stadium names, executive bonuses. We don't have any new jobs."

(Reporting by Nick Zieminski; editing by Patrick Fitzgibbons and Tim Dobbyn)