By Ruth Wood-Steed
It’s 7:15 Central time on Wednesday morning. Joel Prakken,
chairman of St. Louis-based Macroeconomic Advisers, LLC, (MA)
is broadcasting the ADP Employment Report, an estimate of monthly
employment, for CNBC’s financial news show “Squawk Box”—two
days before the Bureau of Labor Statistics issues its report.
When you’re cocky enough to upstage the BLS at their own game,
you had better be good—and have good data to back you up. Typical
of MA, they have an excellent macroeconomic model and have partnered
with ADP for the data (from ADP’s extensive database of more
than 550,000 U.S. companies, one-sixth of the U.S.’ private
employment base) to support their position. And they are exceptionally
good at what they do.
screen to those of us not attuned to the financial world, MA
is among the preeminent macroeconomic advisors in the United
States. Lyle Gramley, senior economic advisor of Stanford Eagle
Washington Research Group and a former member of the Board of
Governors of the Federal Reserve System, says “…Macroeconomic
Advisers is the premier service for forecasting and macroeconomic
advice anywhere in the United States.”
Founded 25 years ago as Laurence H. Meyer & Associates by Meyer,
then a professor of macroeconomics at Washington University,
and subsequently a member of the Federal Reserve, along with
Prakken and Chris Varvares, former students of Meyer and adjunct
professors at the school, the firm transformed the field of
macroeconomic modeling and forecasting. They quickly jumped
on the opportunity to switch from modeling on mainframe computers
to using personal computers (PCs). Then Senior Economist at
the World Headquarters of the IBM Corporation, Prakken recognized
the benefits of the switch, and left IBM to join what has become
what he calls a labor of love. The switch to PCs allowed them
the flexibility, speed and cost-efficiency to provide more accurate
and timely data than their competitors.
Since then, they have remained at the forefront of the field.
Prakken says, “There’s a regular program of maintenance (of
the model) and research.” But their strengths lie not only in
their modeling. “Equations and internal properties of the model
are going to combine with the judgment of our team here, but
also the judgment of a broader group,” he adds.
Varvares, the firm’s president, says: “Is there something the
model will miss? The model is only an imperfect reflection of
the real world. (We have to) see if research passes the smell
test, if it makes sense.”
To a large extent, they do that by supplementing the model with
outside resources. One way is by staying in touch with what’s
happening in the academic community through close ties with
Washington University. It probably doesn’t hurt, either, that
they’re very easy to talk to and recognize the mutual benefits
they and their clients share in doing business. They and the
rest of their senior economists spend a good portion of time
talking with clients, offering advice and expertise, and gaining
industry perspective in return.
Varvares offers another reason for their success. He says: “We’re
not caught up in the herd mentality (of the East Coast and Wall
Street firms).” MA’s St. Louis location gives a clearer perspective.
Also, not being tied to an entity offering financial advice
or to a political party gives them the independence to provide
unbiased views.
That doesn’t mean, though, that they’re totally removed from
the East Coast. Laurence Meyer, the firm’s original visionary,
who left the firm in 1996 to serve as a member of the Fed, returned
to the firm as vice chairman and director and remained in Washington
after his term ended in 2002, opening an MA office there. Partially
thanks to him and others in his office, the firm still has close
ties with the Fed and also has advised several presidents and
their staffs representing both parties, sometimes telling them
what they wanted to hear—sometimes not.
While they prize their independence, Washington contacts can
be handy. Among reasons for hiring MA, ADP CEO Gary Butler says:
“…Glen Hubbard, who’s on ADP’s board, and who’s the dean of
the business school at Columbia, and formerly one of the economic
advisors to President Bush, was very forthright in his recommendation
around Macroeconomics…. It was a pretty straightforward decision
once we got to that point.”
MA is at or near the top of the heap nationally when it comes
to macroeconomic advisors—and they intend to remain there. That
means hard work and providing valuable service to their clients.
The firm maintains an active pace of authoring reports and hosting
seminars. Among other publications, they are responsible for
Macroeconomic Advisers’ Weekly Economic Commentary and Monetary
Policy Insights, the latter a service directed by Meyer which
“provides commentary on the strategic link between the U.S.
economic outlook and policy actions of the Federal Reserve,”
to quote the company’s Web site. They also host very well attended
quarterly meetings on the economic outlook and other key macroeconomic
topics, one in St. Louis, one in New York and two in Washington,
D.C.
Additionally, MA officers and senior economists serve as guest
speakers for events hosted by others. Michael Scully, regional
president-commercial banking at US Bank in St. Louis, calls
on MA frequently to present to top clients and prospects. Scully
says: “Many clients find the presentation, and the follow-up
Q & A, to be valuable in forming their own business strategy
with an eye toward interest rates, economic activity, international
trade issues, etc. The information is always up to the minute
and backed by the long history of success MA has enjoyed.”
Those of us not active in the financial world might be tempted
to think that macroeconomics is a dry, stuffy field. A short
conversation with Prakken and Varvares knocks more than a small
chink out of that belief, however. As Prakken says: “Using a
model really embarks you on a journey. This is fun! After all
these years, it’s still challenging.”
