Independent Contractors See Gains

Despite signs of a recovery, businesses remain cautious, and are relying on more independent contractors to fill in gaps in the workforce.

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We've been hearing some good things that affect the economy lately. Most people seem to think we're in a full recovery, gas prices are down, and more Americans travelled this Memorial Day weekend than have travelled in the past few years.

The SurePayroll Small Business Scorecard has some good things to report for the month of May, too. We continue to see modest month-over-month hiring gains. That brings us to a year-to-date small business hiring increase of 3.7 percent. And while wages fell slightly for the second month in a row (down a tenth of a percent from April), pay is still up 0.2 percent year-to-date, giving us confidence that it is, for the most part, stable. That's not too shabby considering what we've seen in the last few years.

But May's had its share of bad news, too. The Dow Jones Industrial Average plummeted late in the month, suggesting that traders remain nervous about pending financial overhaul legislation and Europe's debt problems. And news of the oil spill has blanketed our TVs and airwaves all month, stirring fears of huge losses in jobs and travel revenue as well as a costly government clean-up.

Where the Small Business Scorecard is concerned, the good hiring news really needs to be tempered with the fact that we continue to see more and more reliance on independent contractors—workers without company-paid benefits and matching FICA taxes, and people who can't always count on their employment continuing. And our optimism level —the percentage of small business owners who feel good about the economy—remains in the 60s (63 percent this month versus 67 percent last month).

So at the end of the day, the good economic news is being balanced by the bad. That's what's leaving us with a whole lot of uncertainty. That's why small business owners are relying on temp workers and not risking the additional overhead. And it's probably also why consumers don't seem to be spending like we're in recovery mode.

After a few really tough years, it's not surprising that small business owners and consumers are responding to signs of recovery with prudence. I predict that we'll have at least many more months of extremely cautious behavior while we wait out the consequences of the Great Recession.

Michael Alter is president of SurePayroll, America’s leading online payroll service. He received an MBA from the Harvard Business School and holds a bachelor's degree in economics from Northwestern University.