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WASHINGTON, July 5 (Reuters) - Salaries paid to employees of small U.S. businesses increased for the 10th straight month in June while hiring picked up, according to private sector payroll data released on Wednesday.
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"While small business hiring has been weak throughout the year, it's a positive sign that hiring increased in June, suggesting that the downturn that many have predicted for the second half of 2006 may not be as dire as was initially predicted," said Michael Alter, president of SurePayroll, an Internet payroll service provider for small businesses.

The average small business salary across the country now stands at an annualized rate of $30,328, returning to levels not seen since June 2004, according to the June 2006 SurePayroll Small Business Scorecard.

"While increasing salaries can create inflationary pressures, one can argue that recent salary inflation is in large part making up for the significant salary deflation we saw in 2004 and much of 2005," Alter said in a statement.

Salaries were up for the year-to-date in all four regions: the Midwest, Northeast, South and West, the report showed. Salary gains were highest in the West, where the average small business salary rose 6.3 percent for the year-to-date.

The survey indicated that 16 percent of respondents had hired new employees in June, whereas only 7 percent had fewer employees than they had in the prior month. The balance of respondents, 77 percent, ended June with exactly the same number of small business employees as they had in May.

The indicators used in the scorecard are derived from employee and contractor paychecks paid by the 16,000 small businesses who use SurePayroll to process their payroll.

Copyright 2006. Reuters.