Data issued by Automatic Data Processing Inc (NASDAQ:ADP) on Wednesday raised concerns over the decelerating pace of monthly employment growth among private U.S. businesses.

This marked the third consecutive month of declines as September numbers rolled in, and details of the report painted a picture of an evolving economic landscape.

Here's what you need to know and what economists have to say.

ADP’s Snapshot: Private employers reported an addition of 89,000 new payrolls in September, a steep drop from the 177,000 recorded in August. The numbers not only fell short of the expected 153,000 but also marked the slowest pace of monthly employment gains since January 2021. Read more on the print here.

The ADP National Employment Report pointed out that large establishments were at the front of the deceleration — having lost 83,000 jobs — effectively nullifying the gains from August.

Nela Richardson, chief economist at ADP, expressed concern, saying, “We are seeing a steepening decline in jobs this month. Additionally, we are seeing a steady decline in wages in the past 12 months.”

Widening the perspective, the ADP report came before non-farm payrolls data scheduled for release by the Bureau of Labor Statistics on Friday.

On the wage front, the numbers provided some food for thought. Employees who stayed in their positions saw their pay increase by 5.9% year over year in September. Conversely, those transitioning jobs saw their rate of pay gains reduced to 9%, from 9.7% in August.

Broader Economic Factors At Play: The Federal Reserve held steady in September with interest rates at 5.25%-5.50%, but hinted at possible hikes, continuing the higher-for-longer interest rate environment.

RSM U.S.’s survey results, according to its Principal and Chief Economist Joe Brusuelas, painted a challenging scenario, especially for middle-market businesses. With the end of low-cost financing, middle market firms now face the rising tide of real interest rates, which is impacting their ability to finance expansion and meet payrolls.

Brusuelas said the risk is a potential economic slowdown or even a recession.

Of note, the economist said smaller firms are hit hardest by rising financing costs. The current environment means smaller firms are now paying between 10.9% and 15.5% for loans. The financial stress visible in RSM's data is accentuated by companies growing reliance on nontraditional bank lending, which lacks the regulatory safety net of traditional bank lending.

The bottom line, as Brusuelas saw it, was the era of zero interest rates was over. The challenges for firms reliant on significant leverage or low-interest rates were mounting. In light of higher nominal and real interest rates, businesses need to strategize to keep afloat.

Brusuelas said a policy response is essential to prevent the economy from slipping into a recession.

Jeffrey Roach, chief economist for LPL Financial, offered a more focused perspective on the ADP report. Roach indicated the U.S. job market is cooling with large businesses, in particular, shedding jobs for most of the recent months.