WASHINGTON (AP) — The U.S. government ran a much smaller deficit through the first two months of the budget year than the same period last year, signaling further improvement in the nation's finances.

The November deficit — the gap between what the government takes in and what it spends — totaled $135.2 billion, the Treasury Department said Wednesday. That's 21.4 percent lower than November 2012. And through the first two months of the budget year the deficit totaled $226.8 billion, or 22.7 percent lower than the same period a year ago. The budget year begins on Oct. 1.

Higher tax rates and a better economy have boosted revenue. At the same time, spending has slowed. Those trends helped shrink the annual deficit last year to $680 billion, the lowest deficit in five years. Private economists predict the annual deficit this year will fall further, to around $600 billion.

The government ran annual deficits of more than $1 trillion in the previous four years, including an all-time high of $1.4 trillion in the 2009 budget year. The Great Recession led to a drop in tax revenue and an increase in emergency spending, such as unemployment benefits.

The economy has gradually improved since the recession ended four years ago. And hiring has accelerated in the past four months. As more people find jobs, tax revenue rises and the deficit shrinks.

Through the first two months of the budget year revenue has increased 10.2 percent to $361.8 billion compared with the same period last year. At the same time, spending in those months has fallen 4.7 percent to $608.2 billion.

House and Senate negotiators reached agreement on a budget deal on Tuesday that would avoid another government shutdown in January and bring some stability to the budget process for the next two years. The deal must be approved by the full House and Senate.

The agreement sets overall discretionary spending for the current budget year at $1.012 trillion. That's slightly higher than the level sought by the Republican-controlled House. But it is below what the Democratic-controlled Senate had wanted. The additional $45.5 billion in spending would be paid for by a range of measures, including a higher fee on airline tickets to pay for airport security

Discretionary spending is roughly one-third of the federal budget and must be approved each year by Congress. The rest of the budget covers mandatory programs, such as Social Security and Medicare. Those spending levels are determined by the number of qualified beneficiaries.

While the deal calls for a $63 billion increase in spending over the next two years, the increase would be coupled with $85 billion in deficit reductions over the next 10 years. That's a net deficit reduction of $22.5 billion over that period.

Congress and the administration have struggled to reach agreement on further improvements in the deficit outlook. Republicans have refused to boost taxes further and Democrats are opposed to making significant reductions in government entitlement programs such as Social Security without additional tax revenue.

The deal reached this week funds the government. But it does not address the need to raise the borrowing limit. The current suspension of the debt ceiling ends on Feb. 7.