Payroll giant Paychex detected a slight slowdown in small business employment growth last month.

The payroll company reported Tuesday that the Paychex | IHS Small Business Jobs Index it tracks with the research firm IHS decreased 0.17 percent from July to August, bringing the national index to 100.48. There was little movement in recent months, giving way to August’s decline.

The index was down 0.51 percent from August 2014. The East North Central region of the country continued to be the top-performing regional index despite a slight decrease month over month.

Wisconsin surpassed Washington to lead among states tracked by the index, while Dallas has continued to rank as the top metropolitan area for 11 consecutive months.

“While we did see some drop-off, it’s still above our base year,” said Paychex president and CEO Martin Mucci. “We’re still seeing the rate of job growth fairly consistent and over 100 in our index, which is positive, because it’s about a half a percent higher rate of job growth than we saw in our base year, which was 2004. It did drop a little bit, about half a percent from last August, but I think you’d expect that to normalize over time. As the recovery continues over a long period of time, the job growth is going to tend to slow down at some point.”

After growth rates for seven of the nine regions improved in July, eight of the nine regions declined in August. New England was the only region to grow in August, at 0.05 percent. The East North Central region fell 0.22 percent in August, but remained the top-ranked regional index at 101.61.

After six consecutive months of gains from February to July, the Mountain region posted the lowest one-month and 12-month growth rates in August. At 99.62, the Middle Atlantic region dropped 0.20 percent in August and is at its lowest level since September 2011. The South Atlantic region remained the lowest-ranked index in August, dropping 0.19 percent to 99.53.

Washington State fell from the top spot and is now tied for third place with Texas. Washington’s index, though, has been over 102 for 23 months, demonstrating continued strength, Paychex noted. Wisconsin also dropped in August, but was able to claim first place among states with an index level of 102.37. With a 12-month growth rate of 0.57 percent and an index level of 102.36, Michigan’s strong performance is in line with the total employment growth this year reported nationally by the U.S. Bureau of Labor Statistics. Virginia, on the other hand, fell 1.84 percent over the past three months, giving it the lowest state index at 96.81.

With the best 12-month growth rate at 1.38 percent and an index level of 105.23, Dallas continues to far outperform all the other metros. Detroit and San Diego have the next best 12-month growth rates and index levels, at 103.25 and 103.00, respectively. Two other California metro indices round out the top five, San Francisco and Riverside. Seattle and Tampa Bay gave up the most momentum in August, falling almost one percent. Houston rebounded 0.56 percent to boost its index back above 100. All the same, Houston has declined 2.81 percent over the last year, trailed only by Minneapolis, -3.22 percent.

“We’re seeing states like Michigan, Wisconsin, Texas and Washington State still look good,” said Mucci. “They had a 2 percent higher rate of job growth than in the base year in 2004, but then other states—the Northeast in particular—tend to be slower in the job growth circuit. Part-time employment is up, and consumer confidence and small business optimism are up. They showed improvement in July. Those are on the positive side.”

On the negative side, changing regulations may be having an impact on job growth, including a proposal from the Department of Labor in late June that would raise the threshold for certain salaried workers who are exempt from claiming overtime pay from $23,660 to $50,440, potentially allowing another 5 million workers to earn larger paychecks.

“The other thing that I think could be slowing things down a little bit are you’ve seen a lot of new regulations,” said Mucci. “Certainly accountants help out with these new regulations, like the overtime rules that are out for discussion right now. Minimum wage rates have gone up in about 22 different states in the last year or so. You are seeing more regulations that come out, which require the accounting community to help out small businesses more in keeping track of the rules.”

Mucci does not believe the recent volatility in the stock market, or the threat of an interest rate hike, are having much of an impact yet on job growth, though.

“The market being down may make small businesses a little bit nervous about investing in a second business or another location,” he said “I do think that plays more on the psyche of the individual, but generally I think it’s more about if there is a demand for their service. Where we are seeing jobs grow the best—and they’re mostly part-time jobs—is in discretionary services, like personal care, pet care, leisure and hospitality. You’re seeing more job growth there, and that’s good news that people are spending, which might get some small businesses in those areas to invest a little bit more.”


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