The latest Paychex | IHS Markit Small Business Employment Watch shows an upturn in the pace of small business job growth for the third straight month, a trend last seen in early 2017. Though down 0.61 percent from last year, employment growth increased 0.15 percent from the previous month, and 0.22 percent in the past quarter, to 98.32. Hourly earnings growth dipped to 2.74 percent in February. Weekly hours worked also fell for the second consecutive month but remain up 0.41 percent from a year ago.

"The national jobs index has turned upward as three monthly increases have recovered the ground lost since June of last year. Wage growth, however, peaked late in 2019 and has begun to decelerate in 2020," said James Diffley, chief regional economist at IHS Markit.

"The past three months mark the longest string of job growth increases in nearly three years, indicating a positive start for small business hiring in 2020," said Martin Mucci, Paychex president and CEO. "However, these results have yet to reflect any impact from cases of the COVID-19 (coronavirus), which are expected to increase in the coming months."

Broken down further, the February report shows:

The South remains the leading region for small business employment growth; the West continues as the top region for hourly earnings growth.

Tennessee continues to lead states in small business job growth; California leads in hourly earnings growth.  

Philadelphia became the top metro for small business job growth; Los Angeles ranks first among metros in hourly earnings growth.

Small business hiring growth is widespread, with all industry sectors showing employment gains during the past quarter.

National Jobs Index

At 98.32, the Paychex | IHS Markit Small Business Jobs Index is up 0.15 percent from the previous month.

The pace of small business employment growth improved for the third straight month, a trend last seen in early 2017.

National Wage Report

Hourly earnings growth slowed to 2.74 percent from a year ago, continuing to soften after reaching three percent in November.

Although up 0.41 percent from a year ago, weekly hours worked growth slowed for the second consecutive month.

Regional Jobs Index

Strong job gains in Construction continue to help the South remain the top region for small business employment growth, with an index above 99.

The Northeast, which increased 0.30 percent in February, remains the only region with positive year-over-year gains (0.46 percent), driven by hiring growth in Leisure and Hospitality and Manufacturing.

Note: Percentages displayed in the regional heat map reflect 12-month changes.

Regional Wage Report 

Hourly earnings growth is the strongest in the West at 3.25 percent, followed by the Northeast at 2.97 percent.

The South is the weakest region for wage and hours worked growth; the growth rate of weekly hours worked has quickly fallen from 1.15 percent in December 2019 to -0.13 percent in February 2020.

Weekly earnings growth in the Northeast ended 2019 over four percent, but has fallen below three percent two months into 2020.

Note: Percentages displayed in the regional heat map reflect 12-month changes.

State Jobs Index

Despite slowing to 100.49 in February, Tennessee has been the top-ranked state for seven months.

With its sixth increase in seven months, the Florida index has climbed to 99.81, ranking second among states.

Note: Analysis is provided for the 20 largest states based on U.S. population.

State Wage Report

California and New York lead states in hourly earnings growth, 3.55 percent and 3.48 percent respectively, though both have slowed to start 2020.

With hourly earnings growth ahead of only Texas, Wisconsin dropped to 1.31 percent growth from a year ago.

Only five states have weekly earnings growth over three percent in February, down from 13 states in January.

Note: Analysis is provided for the 20 largest states based on U.S. population.

Metropolitan Jobs Index 

Philadelphia has surged 2.76 percent since last year and is now the top-ranked metro for small business jobs growth at 99.88.

The bottom seven ranked metros all improved their pace of employment growth in February.

Though still showing job gains with an index level slightly below 99, Dallas has quickly decelerated, down 3.75 percent since July.

Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Metropolitan Wage Report

Hourly earnings growth in Baltimore has accelerated dramatically since the second half of 2019 and now ranks third among metros at 3.54 percent.

The California metros of Los Angeles and San Francisco lead hourly earnings growth, while the Texas metros of Dallas and Houston rank the lowest.

Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Industry Jobs Index

All sectors show hiring gains during the past quarter.

Leisure and Hospitality and Trade, Transportation, and Utilities had the largest increases in February, rebounding from a downturn in 2019.

Experiencing a five-month upswing, Financial Activities is the only sector with positive year-over-year job gains (0.18 percent).

Industry Wage Report  

With just under five percent hourly and weekly earnings growth, Leisure and Hospitality continues to lead among industry sectors. However, weekly hours worked growth in Leisure and Hospitality is negative year-over-year.

At 1.56 percent, Education and Health Services trails all other industries in hourly earnings growth.