There are more indicators that small businesses are recovering from the effects of the recession.

Hiring in January was up 0.8 percent from December, tying with December’s increase for the largest month-over-month hiring increase in the SurePayroll Small Business Scorecard since February 2008. The index, which uses aggregated data from tens of thousands of small businesses, increased 91 points to 11,754.

That’s an increase of 448 points, or 3.96 percent, from the January 2009 reading of 11,306. The index number increased during each of the past 12 months, but according to Michael Alter, president of SurePayroll Inc., that had been driven by small businesses playing it safe and hiring temporary workers instead of full-time employees. But he said a shift happened in December.

“This month (December), we see the contractor index increasing at a much lower rate,” Alter said. “Meaning more of the month-over-month hiring increase is made up of employees and not contractors.”

After 23 months of a downward trend in the SurePayroll Pay Index, a measure of the average small business salary, the Pay Index increased – albeit by just 0.1 percent. The Pay Index increased to 944 in January from 943 in December, but was down 8.79 percent from the January 2009 index of 1,027.

By region, small business hiring was up 0.9 percent in the Midwest and West, and up 0.6 percent in the Northeast and South. The average paycheck was up 0.8 percent in the Northeast and South, up 0.3 percent in the Midwest and down 0.3 percent in the West.

See the full report here.