The U.S. budget deficit narrowed in February after rising employment boosted individual taxes and the Federal Reserve delivered higher earnings on its portfolio.
Spending exceeded revenue by $193.5 billion last month, compared with a $203.5 billion deficit in February 2013, the Treasury Department said today in Washington. The median estimate in a Bloomberg survey of 20 economists was for a $195 billion shortfall.
Employers added 175,000 workers in February as hiring in professional and business services increased by the most in a year, and as payrolls in education and health services rebounded. A growing economy will help cut the full-year deficit to a seven-year low as a share of economy, the Congressional Budget Office said last month.
“The U.S. fiscal situation is improving more than anyone was expecting,” said Paul Edelstein, director of U.S. financial economics at IHS Global Insight Inc. in Lexington, Massachusetts. “Tax revenues go up while unemployment outlays go down.”
Today’s report showed revenue increased to $144.3 billion last month from $122.8 billion in February 2013. Spending totaled $337.9 billion compared with $326.4 billion a year earlier, it showed.
The deficit totaled $377.4 billion in the first five months of fiscal 2014, compared with a $494 billion shortfall from October 2012 through February 2013, according to the report.
The gap this year will narrow to $514 billion, or 3 percent of gross domestic product, from 9.8 percent of GDP in 2009, the CBO said on Feb. 4.
Receipts from the Fed, representing earnings on its portfolio, rose by $5 billion in February, the report showed.
The Fed may not be a source of growing revenue in the future. The prospect of a stronger economy and rising interest rates mean the value of the central bank’s bond holdings will probably fall at the same time that its funding costs climb because it pays interest on the excess reserves it holds for banks.
The Fed estimated its payment to the Treasury this year will decline 12 percent, and Federal Open Market Committee in December discussed concern over potentially facing a year without any money to give to the Treasury.