Payroll processor Paychex and the research firm HIS reported an increase in small business employment in July, with states like Washington and Michigan leading the way.

The Paychex | IHS Small Business Jobs Index increased 0.34 percent in the 12 months leading up through July. The national index increased to 101.11, inching closer to the record high of 101.26 it reached in April of this year. Among the regions, the West North Central jumped to the top of the regional index with the highest monthly increase, thanks to economic growth in North Dakota.

However, Washington continues to lead the states, while Michigan shows impressive improvement in employment conditions. Dallas holds the top spot among metro areas for the second straight month, with Houston gaining ground and taking over the number two spot.

“July’s index results show that small business employment growth is picking up once again, continuing the long-term trend we’ve been seeing for some time now, ” said Paychex president and CEO Martin Mucci in a statement.

At 101.11, the July 2014 national index was higher than any value achieved through 2013. Helped by consistently strong 12-month growth rates in the Mountain and West North Central regions, the national index has increased 0.34 percent since July 2013.

“The Paychex | IHS Small Business Jobs Index begins the second half of the year with an increase over June, adding to the recent favorable indicators of economic gains in 2014,” said IHS chief regional economist James Diffley.

At 102.17, the West North Central leaped to the top of the regional index with the strongest monthly gains, spurred by North Dakota, which continues to lead the nation in economic growth. Nevada and Colorado contributed to positive gains in the Mountain region, which continued to advance at a strong pace with year-over-year growth at 1.41 percent.

While Washington continued to lead the state index, employment conditions improved 1.30 percent in Michigan during the past 12 months, the highest rate in almost two years. Michigan continued its robust index gains, potentially signaling a rise in overall economic activity for the state. Down 0.50 percent from June, the Illinois index has fallen for four straight months, which could be cause for concern as overall job growth has been very weak in the state in 2014.

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With strong 1-month and 12-month gains, Houston rivaled Dallas for the metro index lead as economic development proceeded quickly, notably in new construction activity. The metro index in Phoenix slowed down after a strong start to 2014, slipping 0.41 percent in July from last month. The index also weakened in some parts of California, including Los Angeles, which continues to trend negatively in July.

For an infographic on the results, click here. For the complete report, click here.