The FSB recently carried out a survey of over 1,400 of its members and found that 63% planned to keep recruitment plans on hold for the next three months.
The survey also showed that 16% expected business to improve in the next quarter but 23% thought that their situation would worsen while two in five firms said there would be no change.
John Walker, national chairman of the FSB said that the rise in unemployment confirms that the economy is still too fragile to take on new staff, although small firms are becoming more confident about their overall performance.
He added that small businesses were at the heart of the recovery but they still needed support if they were to begin taking on more staff.
The FSB has called for economic measures that would help small businesses create jobs and assist entrepreneurs to get finance to start new businesses.
