(Reuters) - Like many firms during the pandemic Worxbee, a small business that provides virtual executive assistant services, brought on bodies when Chief Executive Kenzie Biggins thought she found a good match.

Peaking at 11 people, the hiring in the end proved an overreach, and Biggins' staffing is now down to six, mostly through attrition. She's intent on using technology and smarter management to keep it there.

"We're not looking at hiring," said Biggins, whose firm in Greenville, South Carolina, matches executive assistants with executives who need them.

"We're looking at how we build more efficiencies to actually reduce our costs...Prices went wild during the pandemic. Once we increase all these salaries we can't reverse out of that," she said. "I think people are having to make some tough decisions about how they get more efficient with what they have."

If the pandemic years are remembered for labor shortages and the Great Resignation, the prudence now shown by Biggins and others helming U.S. small businesses may point to a great rationalization taking shape.

Her cautious approach may also be starting to surface in broader statistics, reinforcing what Federal Reserve officials feel is a gradual softening of the job market.

While that may be a plus for their efforts to bring inflation to heel, it could pose an additional drag on public perceptions of President Joe Biden's economic management heading towards the November election if weaker payroll and wage growth add to the aftershock of the outsized price increases that continue to weigh on his polling numbers.

'DROPPING TO ZERO'

U.S. employment data for May will be released on Friday, and economists surveyed by Reuters estimate 185,000 jobs were created last month, still more than the average monthly gain in the pre-pandemic years. The jobless rate is forecast at 3.9%, slightly higher than a year ago but low by historical averages.

But the landscape may be shifting.

A National Federation of Independent Business survey of small-firm hiring intentions is stuck near its lowest since the pandemic's onset, leading Pantheon Macroeconomics Senior U.S. Economist Oliver Allen recently to write: "The pressure on small businesses appears to be prompting them to cut back on hiring."

Noting NFIB's survey aligns well with payroll growth about four months ahead, Allen said it is now consistent with "private job growth dropping to zero over the next few months."

Tucked into the latest government survey of business input prices, a decline in the costs paid by staffing services companies points to slowed wage growth, while the share of temp jobs in the overall job market has fallen well below the peaks of the last three business cycles. Temporary hires offer a way for companies to cope with tight labor markets, and their declining use is considered a sign of economic slowing.

A new data series from the Philadelphia Fed, measuring the rate at which people change jobs, points in the same direction. Similar to the popular "quits rate," the new estimate of direct employer-to-employer transitions focuses only on those who leave one position for another, excluding retirees, for example. After rising during the pandemic reshuffling of the labor market, the rate has been falling towards levels more typical of the weak job market that followed the 2007-to-2009 recession.

Ufuk Akcigit, a University of Chicago economics professor who has developed a small business hiring index using anonymized payrolls data from Intuit's QuickBooks accounting software clients, said there has been a steady fall in employment among firms with one to nine workers beginning last year, with jobs among those businesses down 2.3% in May from a year earlier to around 12.7 million.

Payroll processor ADP also showed a drop in small business hiring in its latest monthly survey, the first in six months.

The stress among those small firms, caught between inflation and Fed interest rate hikes, is "signaling broader economic shifts before they become apparent in the overall labor market," Akcigit said.

'KEEP IT LEVEL'

Steady hiring and more than two years with the unemployment rate below 4% have been trumpeted by Biden as a key economic win. Job gains were massive during the pandemic reopening, with the three-month average topping 700,000 at one point. While the quarterly rate has ebbed to a more normal 242,000 through April, that remains above the 183,000 monthly average in the decade from 2010 through 2019.

Fed officials feel hiring likely needs to slow for inflation to return to their 2% target and stay there, though they are uncertain by how much. Increased immigration, for example, may have raised the number of new jobs the economy can add without increasing the pressure to raise wages and prices.

Chicago Fed President Austan Goolsbee last week said "the central question" right now for the Fed is whether a weakened job market will be needed to lower inflation from the current 2.7% - a cost central bank officials worried would be necessary but thought they might avoid after inflation fell sharply last year without rising joblessness.

"What everybody is trying to wrap their head around now ... is are we back to the traditional tradeoff between employment and inflation?" Goolsbee said on CNN International. "That is the central question as we think about the macroeconomy."

The Fed meets next week on June 11-12. Policymakers are almost certain to keep the benchmark interest rate steady in the current 5.25%-to-5.50% range set last July, but will issue new projections showing if they still expect to cut rates, and by how much, before the end of the year.

A sharp slide in hiring is one of the factors that could make officials opt for an earlier move to reduce borrowing costs.

Whether the jobless rate itself rises or not, the impulse to bring on workers and "hoard" them, common during the pandemic's aftermath, does seem to have eased.

The rate at which private firms are bringing on workers is now comparable to where it was before the pandemic.

Howard Hsu, an investor or partner in six Atlanta restaurants including the Michelin-starred Lazy Betty, said the mood around staffing has changed since the pandemic crash and rebound, when in-person services were at first shunned because of the health risks then embraced during an economic reopening.

"It is certainly better now than it was a couple of years ago. It is a lot easier," to find staff, said Hsu, who like Biggins is a member of a small business council that advises Intuit.

"Things are stabilizing...The overall economy is fine," he said, while the aim for staffing at restaurants he is involved in is to "keep it level."