U.S. unemployment rate likely to sink in coming years

The labor market in the United States performed well in this year. On an average, the monthly employment increased by more than 200,000. Similarly, unemployment rate reduced from 5.7% in January to 5.0% in November.

The output gap is expected to narrow down, and thereby, labor market will be tighten further.

"We expect the unemployment rate to hit 4.6% at year-end 2016 and 4.4% at year-end 2017 assuming that the labour force will grow by approximately 150,000 per month on average both years. If it turns out that we are too optimistic on the participation rate, the unemployment rate will fall more than in our base case", says Danske Bank in a research note on Thursday.