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WASHINGTON | Wed Jan 4, 2012 12:32am EST (Reuters) - Small businesses created 55,000 jobs in December and increased working hours for employees, further evidence the labor market was strengthening.

In addition, workers at small businesses saw a rise in their paychecks last month, said payrolls processing company Intuit on Wednesday.

December's gain compared to November's upwardly revised 70,000 count, which was previously reported as an increase of 55,000.

The jobs market is showing signs of firming, with the unemployment rate dropping to a 2-1/2-year low of 8.6% in November. In addition, first-time applications for state unemployment benefits are hovering near 3-1/2-year lows.

Households' perceptions of the labor market are also improving, with measures of jobs "plentiful" and "hard to get" in the Conference Board's December consumer sentiment survey yielding their best readings since January 2009.

The revision to Intuit's small business payrolls in November suggests that the government's non-farm employment count for that month could be raised from 120,000 when figures for December are released on Friday.

December non-farm payrolls are expected have increased 150,000 according to a Reuters survey, with the unemployment rate seen edging up to 8.7%.

The government has been revising the prior months' nonfarm payrolls figures higher and analysts say the Bureau of Labor Statistics' model tends to delay the count of small business employment.

The Intuit survey is based on responses from about 72,000 small businesses with fewer than 20 employees that use the Intuit Online Payroll system. It covered the period from Nov. 24 to Dec. 23.

The average work week for small business employees rose 0.4% to 25.4 hours, while the average monthly salary increased 0.4% to $2,706.

"All of the figures we track show a stronger small business environment in December," said Susan Woodward, the economist who helped to create the index.

However, she noted increased volatility in the seasonally adjusted series for employment, hours worked, and compensation over the last four months, compared to earlier in 2011.

"This volatility in the small business indicators parallels, with a slight lag, the increase in volatility in the stock market. All suggest that while a mild recovery is underway, it is fragile," said Woodward.

(Reporting By Lucia Mutikani; Editing by James Dalgleish)

© 2010 Thomson Reuters. Click for Restrictions.

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