The U.S. posted a $130 billion budget deficit in May and the smallest shortfall for the first eight months of a fiscal year since 2008, as a stronger economy and rising employment bolster revenue.

The deficit last month was about $9 billion less than the $139 billion shortfall in May 2013, the Treasury Department said today in Washington. The median estimate in a Bloomberg survey of 20 economists called for a $130.5 billion gap.

“U.S. budget dynamics have been on a much better trajectory as of late, with both cuts to spending and higher revenues helping to push fiscal year 2014 deficit projections substantially lower,” said Gennadiy Goldberg, U.S. strategist at TD Securities USA LLC in New York. “The revenue component is indicative of a gradually recovering economy.”

For the fiscal year, which began Oct. 1, the government is running a budget deficit 30 percent smaller than it was a year earlier and the narrowest at the eight-month mark since 2008. Revenues for that period are 7 percent higher than a year earlier and outlays are 2 percent lower.

In the fiscal year through May, the government posted a $436.4 billion deficit compared with a $626.3 billion shortfall in the same period a year earlier, the figures showed.

Today’s Treasury report showed revenue increased to $200 billion last month from $197 billion in May 2013. Spending totaled $330 billion, a 2 percent decline from the same month a year earlier, the figures showed.

Treasury Auction

Treasurys today erased gains after the U.S. sale of $21 billion in 10-year notes. The notes drew a yield of 2.648 percent, compared with a forecast of 2.633 percent in a Bloomberg News survey of seven of the Federal Reserve’s 22 primary dealers.

The Congressional Budget Office in April projected that the federal deficit will decline to $492 billion this fiscal year, the smallest in six years, from $680 billion in 2013 and a record $1.4 trillion when President Barack Obama took office in January 2009.

Next year, the shortfall will decline further, to $469 billion, the nonpartisan agency said. The 2014 deficit will be 2.8 percent of gross domestic product, according to CBO, compared with 4.1 percent of GDP in 2013.

The U.S. labor market has improved this year. Payrolls pushed past their U.S. pre-recession peak for the first time in May, the fourth consecutive month employment increased by more than 200,000, the first time that’s happened since early 2000.