Every December it seems as though the sun will continue drifting south, never to return to the northern hemisphere.  Then in early January, the sun that used to come up over the neighbor’s chimney for the past week or so is now coming up just a tiny bit north of that chimney.  An economy can act like the winter’s sun, moping about in the doldrums until a few signs appear that things are going to get better.

In the past few months, initial claims for unemployment have fallen slowly but steadily, approaching that magic mark of 400,000, which economists regard as a milepost on the way to a healthy economy.  Another gauge of recovery are tax receipts.

Every month the Congressional Budget Office (CBO) publishes a review of the country’s finances.  In January’s review  the CBO notes that withholding taxes and other income taxes have increased over 20% in the last calendar quarter of 2010 (1st quarter of the U.S. Treasury’s fiscal year 2011 which started in October 2010).  Withholding and social security taxes make up about 80% of overall receipts to the treasury.  Below is a comparison of this past October – December with the same quarter of earlier years.

We can judge the health of local and state economies by the amount of sales tax collected.  The increased amount of witholding taxes in the past quarter is a barometer of a recovering economy.