Tennessee leads the nation in small business job growth

Top states for small business growth

1. Tennessee2. Florida3. Georgia4. Washington5. VirginiaSource: Paychex/IHS Markit Small Business Employment Watch

Top metro areas for job growth

Among the 355 metropolitan cities, six of the top 50 cities for job growth are in Tennessee. The top Tennessee cities and their rank among all U.S. metro areas are:7. Cleveland, Tenn8. Nashville19. Morristown28. Knoxville29. Johnson City33. ClarksvilleSource: Chattanooga ranked 63rd among the 355 metro areas for job growth

Tennessee continues as the No. 1 state for job growth among small businesses, according to data collected by the nation's biggest payroll provider.

But Paychex's latest monthly review of small business staffing also indicates the pace of hiring nationwide appears to be slowing following the employment spurt after the November election.

"The increased pace of small business employment growth that we saw following the election of President [Donald]Trump has slowed," said Paychex President Martin Mucci. "Small business owners now seem to be taking a more wait-and-see approach to hiring. Despite that, wages continue to rise, which is certainly good news for workers."

Tennessee added 3.7 percent more jobs over the past year to rank as the top state for small business job growth, Paychex said. Georgia ranked third in job growth among the states with a 1.1 percent increase in employment among firms with 50 or fewer employees.

Tennessee's average wage rate of $22.71 last month was up 3.61 percent in the past year - the third biggest gain among the 50 states behind Arizona and California. But Tennessee wages still averaged nearly 12 percent less than the U.S. average wage rate of $25.76.

"We are seeing a pickup in wages as the labor markets tighten," said Frank Fiorille, vice president of risk management and data analytics for Paychex. "Small businesses tend to follow the growth of major new industries that start up or relocate to an area and we're seeing more of that in Tennessee."

Jim Brown, director of the National Federation of Independent Businesses in Tennessee, said the Volunteer State is benefiting from its central location, its relatively low tax rate and cost of living and its more favorable business climate.

"We're a more business friendly state and a lot of the state's public policies are moving in the right direction while other states are often moving in the wrong direction for small businesses," Brown said.

Although the declining unemployment rate has created some labor shortages and bid up wages in Tennessee, the state's repeal of estate and gift taxes, its fiscally conservative budgeting and its improving education system are making Tennessee more inviting for business growth, Brown said.

"In a lot of other states, you are seeing higher minimum wages, higher taxes and less fiscal discipline and that is not as conducive for business growth," he said.

Brown noted a new study of job growth last year in America's 355 metro areas by Visa found six of the top 50 cities were in Tennessee, including Cleveland, which ranked 7th and Nashville, which ranked 8th among all metro cities for job growth.

Morristown, Knoxville, Johnson City and Clarksville also ranked among the top 50 cities in the rate of job growth during 2016, while Chattanooga's job growth ranked 63rd among the 355 cities.

"Tennessee is moving in the right direction," Brown said.

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.