Tennessee and Georgia are leading the country in job growth among small businesses, according to employment data compiled by one of the nation's biggest payroll processors.

Tennessee was the No. 1 state for small business employment growth in January, rising nearly 4.2 percent last month, according to the monthly Paychex | IHS Small Business Jobs Index released Tuesday. Paychex, which processes about one of every 11 employee pay checks in the United States, ranked Georgia No. 2 among the 50 states with employment growth of more than 2 percent, while Atlanta was the top metro region in the country for small business job growth with employment up nearly 3 percent.

Frank Fiorille, vice president of risk management for Paychex, said small businesses in the Volunteer State appear to be benefiting from both the success of startup and entrepreneurial ventures and the economic spin-offs from major carmakers and other manufacturers expanding in Tennessee, including GM, Nissan and Volkswagen.

"Tennessee has really been strong over the past three to six months and in our data it looks like construction and other services is driving the growth," Fiorille said. "A lot of the small businesses we serve are what we call second derivatives off of many major manufacturers so the growth of auto manufacturers and others is undoubtedly helping many small businesses to grow."

All three of Tennessee's major auto makers are expanding operations in Tennessee.

Nationwide, the Paychex payroll data shows small business growth faster than the 2004 baseline year in most states.

"The increase in this month's index tracks with the positive performance of other economic indicators as well as overall business optimism since the presidential election," Paychex President Martin Mucci said.

Business leaders in Tennessee said the Volunteer State appears to be gaining a stronger economic foothold in the new year.

"Tennessee certainly weathered the storm of the Great Recession better than most states did, and we're doing well ompared with the rest of the country," said Jim Brown, the Tennessee president of the NFIB, which represents small businesses. "That's a big reason why so many people are moving here,"

Bradley Jackson, president of the Tennessee Chamber of Commerce, said taxable sales and business hiring are both increasing and he expects that to continue through 2017 and beyond.

"Tennessee has a good business climate and we're a low-cost, low-tax state that more companies and entrepreneurs are discovering and coming to to do business," he said.

The Paychex index each month analyzes same-store changes in worker counts to identify and track small business employment trends using payroll data from the Paychex client base of more than 350,000 employers across the country.

Contact Dave Flessner at or at 757-6340.