Job growth among the country’s small businesses slowed in 2017, reports payroll and human resources solutions provider Paychex and analytics firm IHS Markit in their Small Business Employment Watch. The Small Business Job Index stood at 99.7 in December, down 0.16 percent for the month and 0.78 percent for the year. Hourly earnings growth improved over the year, however. At $26.14, hourly earnings in December gained 2.76 percent year over year and averaged a 2.85 percent growth rate for 2017, up from the 2016 average of 2.75 percent.

“Small business job growth has slowed in 2017, even as the rest of the economy accelerated,” says James Diffley, chief regional economist at IHS Markit.

Martin Mucci, Paychex president and CEO, adds, “While small-business jobs growth slowed this year, it’s important to recall that small businesses led the hiring surge coming out of the recession and maintained high levels of growth for quite some time. It will be interesting to see the impact tax reform makes on job and wage growth in the months ahead.”

At a regional level, the Small Business Employment Watch reports that southern states led in employment growth, while those in the west report the highest increases in wages. Employment growth slowed throughout most of the country in December, compared to the previous month and last year, although improvements were witnessed in some parts of the south due to the oil recovery, and in New England. At 3.51 percent, the western states’ hourly earnings growth leads those in the south by almost a full percentage point (2.64 percent).

Viewed state by state, Tennessee, Washington and Florida have the strongest levels of small-business job growth, despite all three dropping from last year's levels by approximately one point. Arizona, at 5.26 percent, registered the strongest rate of wage increase.

For further detail from the Small Business Employment Watch, click here.