The hair loss you are observing on this squirrel might be a result of several conditions: (1) Notoedric mange is caused by a mite, Notoedres douglasi, which is host specific to squirrels, (2) Sarcopic Mange is also caused by a tiny mite called Sarcoptes scabiei and it burrows under the skin to feed on the squirrel's blood. It causes sever itching, a rash, crust formation on the skin and hair loss. (3) Dermatophytosis is a skin fungus that attacks the hair shaft and can be distinquished from Mange by the absence of irritation, crusting or rash. (4) Ringworm, and (5) Botfly. All of these will cause hair loss at the site.
With all these possibility, I would highly suggest keeping outside pets away from the area where this critter is inhabiting. Hair loss is serious now that winter months are arriving and the squirrel may not live through the season. Another problem with the on-coming winter months is that squirrels tend to colonize together in a single nest during cold months and the skin problem can be shared, even with new young born inside the nest. Without testing the actual skin site, it is difficult to accurately determine this problem is associated with ringworm - which usually will show-up on the skin surface in a circular pattern. ~DOT