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The U.S. labour market continues to surprise on the upside, but Moody’s Investors Service expects conditions to ease in the months ahead.

The latest data from the U.S. Bureau of Labor Statistics pointed to strong job gains in March, with three-month average running well ahead of its pre-pandemic level.

The U.S. unemployment rate also ticked down to 3.8% in March from 3.9% in February.

Despite these strong recent results, “most labour market indicators continue to point to gradual normalization in the U.S. labour market, where hiring, layoffs and quits are mostly back to pre-pandemic norms,” the rating agency said in a new report.

Moody’s said it continues to expect the unemployment rate to rise modestly over the next few quarters “as the strong labor market attracts sidelined workers and as firms right-size their operations to better match consumer demand in an economy gradually returning to potential.”

Additionally, while wage growth is running slightly above its pre-pandemic average, it expects above-trend corporate profits and labour productivity to help keep inflationary pressures low.