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Center for Career Strategy
and Advancement
Levy Mayer Hall, Room 124
357 East Chicago Avenue
Chicago, IL 60611-3069

Phone: (312) 503-3498

Market Trends

Welcome to the Center for Career Strategy & Advancement's Market Trends webpage!

Our goal is to provide our assessment of, as well as third party information regarding, overall hiring trends in the legal marketplace, and to link to recent articles providing detailed analyses and updates.

Summary
Following the end of the first quarter of 2009, we are amidst a decline in law firm revenue and the demand for legal services. Despite a range of factors leading to these downturns, we are seeing growth in certain practice areas, particularly bankruptcy and litigation, though not at a level to entirely offset declines in various corporate practice groups. Firms have taken a conservative approach to managing expenses, including slowing hiring, attorney and staff layoffs, and even closing offices.

Legal Services
Government data preceding the current economic crisis indicated that the market for legal services had continued to increase as a proportion of the GDP (click here for a graph which showing the consistent growth in legal services revenues over the past twelve years). However, the Hildebrandt International Peer Monitor Index shows an 8% decrease in demand for legal services in Q1 2009 when compared to the same period of time in 2008. The decline in demand was steep in Janauray in February, but did flatten out in March.

Geography
The decreased demand for legal services has been felt differently across the nation, with markets experiencing varying drops in demand in Q1 2009. San Francisco, an outlier compared to other markets, experienced only a 1% decline in demand as compared to sharper declines in other major U.S. market (Los Angeles and Chicago: 8%, New York: 9.5%, and Washington, DC: 12%). International markets saw demand shrink as well (e.g., London: 12.5%). By the end of the year, it is predicted that Tokyo, Beijing, Seoul, and Brazil will grow, and Dubai/UAE will remain strong. Within the U.S, Reno and Las Vegas are expected to be "hot" markets, and Chicago may benefit from regional and national firms seeking to gain a Midwestern presence.

Practice Areas
As economic growth has slowed down, so too has corporate work, particularly M&A, finance, commercial real estate and securitization. Significant banking bankruptcies and buyouts have slowed down deals due to financing uncertainties and created the potential for lost underwriting work. However, bankruptcy (up 13% in activity in Q1 2009) has picked up and growth has been experienced in regulatory and litigation practices, as well. While there has been a shift in the demand for legal work, there remains a lot of existing and new work to be done. "Hot" practice areas for 2009 include bankruptcy, regulatory and litigation, intellectual property (including IP litigation). Additional practice areas predicted to be "hot" in 2009 include antitrust, foreign corrupt practices, health care, labor and employment, and environmental law - all in reaction to the new presidential administration and expected regulation. It is believed that the new Build America Bonds arising out of the stimulus package will lead to new bond work, as well as ancillary work connected to bond-related building projects.

Attorney Hiring
The market for attorneys slowed in reaction to the economy, with 2008 associate hiring down 6% compared to 2007. However, 2008 lateral hiring was about on par with 2007. Non-equity partnership is the fastest growing segment of the attorney population, accounting for 35% of partnerships in Am Law 100 firms. In a recent survey of law firm leaders, 43% expected to hire fewer new associates in 2009, though 72% did expect total firm headcount to increase. Equity partner promotions are down 50%, with equity partnerships shrinking at some firms.

In recent months, attorney and staff reductions have become more common. Despite predictions that firms facing financial struggles would make their layoffs by the end of 2008, we have seen significant layoffs in 2009. The timing is largely due to the law firm billing cycle, a review of year-end 2008 numbers, and the lack of traditionally expected voluntary attrition. While initial layoffs and office closings tended to be in locations most closely tied to financial markets, particularly New York and Charlotte, recent layoffs have hit almost every substantial legal market, and national and international firms have seen the layoffs spread across almost all offices.

It is estimated that since January 2008, over 22,300 legal sector jobs have been lost. In the U.S., the number of employed attorneys declined by 7000 in 2008. It is reported that 25% of the UK's largest law firms are considering layoffs in 2009 and/or have already done so. Seasonally adjusted U.S. Department of Labor statistics show that 8200 legal sector jobs were lost in the first quarter of 2009 (1300 in January, 4200 in February, and 2700 in March). On February 12 and 13 alone, almost 800 lawyer and staff positions were lost, and over 800 more were lost in the first 10 days of March. Putting this into perspective, approximately 3.3% of lawyers at AmLaw 200 firms have lost their jobs since January 2008 (2.5% since January 2009). The UK has had its share of layoffs, too, with several large firms laying off over 8% of their attorneys (Allen & Overy: 12.2%, Clifford Chance: 10.8%, Linklaters: 8.6%). Recent dissolutions include Heller Ehrman, Thelen Reid Brown Raysman & Steiner, and Wolf Block. Click here for a list of law firm layoffs.

Summer Associate Hiring
In fall 2008, the number of employers recruiting at Northwestern Law increased slightly. Reflecting on fall recruiting, nationwide, offers for 2009 summer associate positions fell by 33%, with offers from the nation's largest firms falling by almost 40%. That greatly exceeds what we experienced at Northwestern Law, where offers were down slightly. Mid-sized firms continue to focus more on recruiting new lawyers from local schools and in some cases have decreased visits to schools outside of their geographic region. It is expected that fall 2009 recruiting will continue to reflect the economic downturn, with likely further reduced summer associate class sizes.

Starting salaries among most of the large firms in the larger markets remain at $160,000, though we have begun to see firms reduce entry-level and existing salaries. The salaries at the largest firms put financial pressure on mid-sized firms.

Law school applications have increased nationally (approximately 1% for 2009, following a slow and steady decline from 2005-2008) and law schools class sizes remain relatively stable (up 0.3% in 2007; 2008 numbers are not yet available). There appears to be stratification in law school choice, with students opting for higher ranked schools in reaction to the troubled economic outlook.

Law Firms
Though recent months have proven to be challenging to firms of all sizes, some of the nation's largest firms have been hit the hardest. A survey of law firm leaders indicates an expectation that profits per partner will remain level or slightly decline in 2009. Due to a focus on limited practice areas, lower overhead, and flexibility in working with clients on reducing expenses, smaller firms and boutique firms (depending on their practice area) may be positioned well for adapting to changes in the legal market. Overall, firms have been good at limiting expenses (up 6% in 2008 v. 10% in 2007) and as mentioned above have also made staffing changes to adjust for decreased productivity and demand. While several firms have stated that they will not increase fees in 2009, a recent survey found that fees grew by almost 3% in Q1 2009.

Law firm mergers are again on the rise, as is global expansion, particularly in Asian markets. Almost 25 firm mergers were completed by the end of the first quarter, most between firms smaller in size seeking to diversify based upon practice or geography. In Chicago, Bell Boyd & Lloyd recently merged with K&L Gates (national firm with a Pittsburgh home office) and Schuyler Roche grew its litigation practice by merging with Crisham & Kubes. (For updated information on law firm mergers, we highly recommend Altman Weil's Mergerline).

Two very common associate trends are the freezing of salaries and bonuses and the pushing back of start dates for Class of 2009 anywhere from late-2009 to January 2011. Some firms have rescinded offers to incoming attorneys and others have offered deferral plans, such as paying a significantly decreased salary in exchange for working in public interest for a year and starting at the firm in late-2010. Several firms have reduced their associate (and even partner) salaries. Incoming associates, as well as those already at the firm, may find themselves working on matters outside of their primary practice group in the short-term.

While it is hard to predict whether the economic downturn will have a lasting impact on how law firms function, a recent Altman Weil survey is revealing of potential permanent and temporary changes. The 208 survey respondents highlighted four areas where permanent change is likely: (1) increased price competition, (2) lengthened partnership track, (3) increased use of contract attorneys, and (4) alternative client-billing options. While in the aggregate respondents thought that changes in associate-partner leverage would be temporary, 40% of respondents with over 500 attorneys thought changes would be permanent.

Government and Public Interest
While federal government lateral hiring will likely increase in 2009, presently all entry-level hiring, which is conducted through the Honors program, remains stable. State and local government hiring is largely frozen due to stress related to decreased tax revenues. Entry-level public interest hiring is down. Legal Aid across the country has been hit particularly hard due to decreased IOLTA funds. Due to the large number of attorney layoffs, it is expected that volunteerism at public interest employers will increase in 2009. Several firms have offered to pay recently laid off attorneys and/or deferred incoming associates reduced salaries to work in public interest placements for specified periods of time (typically 9 - 12 months).

Diversity
The overall percentage of ethnic minorities in the 252 largest U.S. firms rose from 13.4% in 2007 to 13.9% in 2008 according to The Minority Law Journal's 2009 Diversity Scorecard. The percentage of minority partners improved incrementally, as well, up to 6.6% in 2008 from 6.2% in 2007. There was also a slight increase in the percentage of newly promoted partners that are minority lawyers (from 13.3% in 2007 to 13.8% in 2008), but minority lawyers made up a smaller proportion of lateral partner hires (from 11% in 2006 to 9.6% in 2008).

Wilson Sonsini Goodrich & Rosati received the highest diversity score (42.5) and boasts the third highest percentage of minority attorneys (25.5%)(Note: The current Diversity Scorecard rankings are based upon a revised formula that gives greater weight to minority lawyers in senior positions). The individual law firm with the highest percentage of minority attorneys was Lewis Brisbois (26.3%), the firm with highest percentage of minority partners was Curtis Mallet-Prevost, Colt & Mosle (18.5%), and Greenberg Traurig reported the highest total number of minority partners (79). Irell & Manella had the highest percentage of openly gay and lesbian attorneys (8.4%) and Curtis Mallet-Prevost, Colt & Mosle had the highest percentage of disabled lawyers (2.0%).

Resources: American Lawyer, Bureau of Economic Analysis, Bureau of Labor Statistics, Hildebrandt International, Hildebrandt International Peer Monitor Index, Legal Times, The Minority Law Journal, National Law Journal, NALP, and New York Lawyer.


Recent News

Salary & Market:

Law Firms With Biggest Profits Are Resisting Deferrals, American Lawyer, June 18, 2009

Law Firms Post-Recovery: How They'll Hire and Whom They'll Serve, Legal Intelligencer, June 15, 2009

Recession keeps family lawyers busy, National Law Journal, June 15, 2009

One Alternative to Being Laid Off: A $100,000 Pay Cut for an In-House Job, AmLaw Daily, June 2, 2009


Firms:

Cravath Joins the Start Date Deferral Party, AmLaw Daily, June 12, 2009

Frost Brown Todd starts apprentice program, Business Courier of Cincinnati, June 12, 2009

For Midsize Firms, Opportunities Abound, Legal Intelligencer, June 1, 2009

Am Law 200: Where the Work Was, American Lawyer, May 29, 2009


Summer Associate/Associate:

Summer Associates Can Stand Out by Balancing Fear With Enthusiasm, New York Law Journal, June 15, 2009

Grooming Young Lawyers for Law Firm Management, Legal Intelligencer, June 12, 2009

Deferred Associates Face Many Conditions in Working as Court Clerks, AmLaw Daily, June 10, 2009

Free: T.I.P.S. for a Successful Summer, New York Law Journal, June 1, 2009


Diversity & Lifestyle:

Stuck in the Middle, American Lawyer, June 1, 2009

Are Law Firms Reducing Commitment to Diversity, Leadership Training Due to Downturn?, National Law Journal, May 14, 2009

Diversity Scorecard 2009, Minority Law Journal, May 6, 2009

GCs, managing partners get together on diversity, National Law Journal, May 5, 2009


Clerkships:

Clerks in Paradise, American Lawyer, January 9, 2008


Geographic Markets:

BigLaw Bullish on Chicago, National Law Journal, June 11, 2009

Hello, SoCal!, National Law Journal, March 30, 2009

Sunshine State Firms Weathering Bitter BigLaw Winter Pretty Well, New York Lawyer, February 20, 2009

Bay Area Firms See Profits Drop Up to 21%, Revenues Flat, AmLaw Daily, January 9, 2009


Student & Bar Issues:

Cheating 2.0, National Law Journal, May 25, 2009

Cue the griping: U.S. News releases law school rankings, National Law Journal, April 23, 2009

Attorney Loses Law License Over Unpaid Student Loans, National Law Journal, April 20, 2009

UCLA Law offers a new option for deferred associates, National Law Journal, April 17, 2009


Public Interest & Pro Bono:

Lawyers Operate Without Borders Too, National Law Journal, June 5, 2009

Are Public Interest Lawyers Getting Crowded Out by Deferred Associates?, National Law Journal, June 2, 2009

Nonprofits need help now, National Law Journal, April 27, 2009

2008 NLJ Pro Bono Awards, National Law Journal, January 5, 2009


Corporate & Client Issues:

Saul Ewing Puts Its Alternative Fees in Writing on the Web, Legal Intelligencer, June 18, 2009

Kirkland Expands Use of Special Fee Structures, National Law Journal, June 15, 2009

The Return of Welcome to the Future: The Change Conversation Picks Up Speed, AmLaw Daily, June 11, 2009

New Approaches, New Firms on Corporate Clients' Shopping Lists, Fulton County Daily Report, June 2, 2009

Last Updated: June 2009

 
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