Business confidence is still weaker in Northern Ireland than in most other regions of the UK, according to a new report.
The Federation of Small Businesses said that the chance of small firms hiring new staff remains "weak" despite rising confidence in the sector.
Companies were also said to be making tough decisions, with a higher number than expected cutting jobs at the end of last year.
But the federation said the immediate outlook was more encouraging, with fewer small firms expecting to reduce staff numbers.
Business confidence is weakest in those areas heavily dependent on the public sector, including Northern Ireland and Wales, said the FSB. Chairman John Walker said: "The fact that more small businesses had to lose staff than they anticipated is a worry, especially as female and youth unemployment both edge towards a million.
"If the Government truly wants the private sector to pick up the slack that its austerity measures create, small businesses need a helping hand.
"At the end of 2010 the feeling across the country was very downbeat as businesses lost confidence, having to deal with a rush of challenges from the impending rise in VAT, to the economy dipping back into negative territory. This continued into 2011 as fuel prices increased and inflation affected spending power.
"The economy should return to growth in the first quarter but questions still remain about the strength of the recovery."