ESRI forecasts for 2010 allow me to update the internal/external balance plot first used by Brendan Walsh and myself to describe the lengthy cycle 1975-2001.
The first chart, with data up to 2006, shows the previous big counterclockwise cycle: first the balance of payments goes into deficit (1975-1979); then the correction begins and unemployment rises (1980-85), the balance of payments deficit contracts (1981-87) and moves into surplus (1991-93); finally unemployment comes down again (1993-2000).
Looks like the Irish hare is taking a shorter and sharper curve this time. The balance of payments blow-out (2003-2008) has been much smaller in amplitude and shorter in duration than in the 1970s and 1980s. The rise in unemployment (2007-2010) is much faster than in 1981-86. Sooner or later we’ll get back to the bottom centre of the graph with low unemployment and zero balance of payments.
The first chart shows data up to 2006, the second one joins the dots for 2007-2010 according the the ESRI forecasts published this morning.
(PS: For those who like two-dimensional business cycle graphs, there is a very nice one (plotting rate of change of GDP against its level) for the US in a recent issue of the New York Times. Wish I had a copy of their animation software!)