The South remains the strongest region for small business job growth, while growth was most consistent in the Northeast. (Photo: Shutterstock)

Workers at small businesses ended 2019 with earnings growth at an "all-time high," according to the Paychex-IHS Markit Small Business Employment Watch for December.

The number of hours worked at small businesses last month had the strongest gains since 2012, pushing weekly earnings growth to 4.13 percent, a new all-time high for employees of small businesses, according to the report. The pace of small business employment growth remains consistent, with the national jobs index increasing slightly (0.06 percent) in December to 98.16.

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"Small business job gains have flattened in the second half of the year as labor markets prove very tight," says James Diffley, chief regional economist at IHS Markit. "In response, weekly earnings have accelerated, surging from 2.49 percent mid-year to 4.13 percent at year-end."

"The new high seen in weekly earnings growth this month is certainly positive news for the employees of small businesses," adds Martin Mucci, Paychex president and CEO. "Not only are businesses raising wages, but they're also increasing hours for their current employees, a sure sign employers are responding to the pressures of the tight labor market."

It's not a surprise that small businesses are increasing wages and hours for workers writes HR Dive, citing a May 2019 TD Bank survey​ that found owners of small and medium businesses were ​optimistic about their growth prospects.

"It's also not surprising that small and medium businesses would be at the forefront of such a change," HRDive writes. "They've been quicker to raise wages historically."

Drilling down further into Paychex-IHS Markit's report:

• The South remains the strongest region for small business job growth at 98.87, despite experiencing a one-month decline in December (the only region to do so). Small business job growth was most consistent in the Northeast throughout 2019, moderating just 0.38 percent from the previous year.
• At 3.68 percent, the West leads hourly earnings growth among regions, trailed closely by the Northeast (3.44 percent). The gap in earnings among regions is growing as the South and Midwest have the lowest hourly and weekly earnings as well as the weakest growth rates.
• Among states, Tennessee remains the top state for small business job growth with an index level of 100.65, up 2.11 percent year-over-year. Ohio and Michigan each posted large one-month gains in December, more than 0.40 percent, to move into seventh and tenth place among states, respectively. New York joins Washington among the states with the lowest index levels, now below 97.
• New York and California lead earnings growth among states, both above four percent in hourly earnings and five percent in weekly earnings. Texas and Arizona rank among the top three states in job growth, but are last in hourly earnings growth, both below two percent.
• Among metropolitan areas, Detroit, at 98.10, had the strongest one-month increase in December (0.83 percent). Denver (99.44) has posted strong back-to-back gains and now trails only Dallas (100.21).
• Hourly earnings growth ranges from 4.84 percent in Los Angeles to 1.19 percent in Tampa. San Francisco's weekly earnings topped seven percent growth in December, aided by a 1.80 percent increase in weekly hours worked, best among metros.
• Across industries, small business employment growth in leisure and hospitality increased 0.29 percent in December to 97.70. The top three ranked sectors all slowed during the past quarter, while the bottom five sectors posted positive gains.
• Leisure and hospitality ranks first in all three wage growth components, hourly and weekly earnings as well as weekly hours worked. Education and health services is the only industry below two percent hourly earnings growth.

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