Maybe he could be flirting with you.I think it could mean both maybe flirting or maybe he likes you. It's hard to tell. Also if he is taking your jokes to serioulsy then maybe yo ucna change the content of the jokes around a bit. some peopel I learn you cna't joke around with them for a lot of reasons.Then their is peopel who don't get my jokes sometimes.I would say just act normal and how you normally act at work. If he ever tries to ask you out or something. Just tell him you don't date co-workers or that your not interested. It might not reach that point. Just keep an eye out if keeps it up with the babe comments.
He's flirting with you because he's attracted to you, yes. You need to figure out a way to make it clear that you aren't interested. The classic way is to mention "your boyfriend" or talk about "this guy you are interested in" when he's around. That will let him know he's wasting his time, and unless he's super desperate or clingy, he'll look elsewhere.
From a guys point of view, you should just tell him how you feel. Some guys are blinded by how beautiful a girl is / how she makes him feel, that sometimes he might not realize that the jokes are jokes. If a dude is in the "friend zone" just let him know.
Terms of endearment...southern people tend to use them more than northern, however, he COULD like you...won't know until he makes a move on you (physically)...as you know, actions, speak louder, than words