Thomson Reuters Peer Monitor — in conjunction with Georgetown University Law Center’s Center on the Study of the Legal Profession — recently issued its annual report on the legal market, which you can find here. Some highlights:
- 2014 saw a modest increase (0.5%) in the demand for legal services, which is better than the drop in demand experienced in 2013, but overall indicative of a trend, which has extended over the past 5 years, of fairly flat demand growth
- the growth has been in transactional practice activities (corporate, tax, and real estate); demand growth in litigation was actually slightly negative. Litigation still accounts for about a third of all practice activities (though it was more like 40% twenty years ago). Corporate accounts for 23% (and tax and real estate come in at 3% and 6% respectively).
- number of lawyers in US firms grew by 1.4% in 2014 (about a percent more than demand, which in turn led productivity to fall a bit)
- despite all this, profits per partner (PPP) were up 3.1% (over 2013, a year during which PPP grew by only 1%)
- if you adjust for inflation, business spending on legal services is down almost 26% from where it was in 2004
The Report also addressed the reasons why the legal market has not improved to the same extent that many other sectors of the economy have:
- corporations increasingly keeping work in-house or farming it out to non-law firm service providers
- general counsel finding litigation a less attractive option as it’s become more expensive (e-discovery)
- continuing proliferation of new, non-traditional service providers (facilitated by the steady world-wide collapse of, or the finding of workarounds to, regulatory barriers that shielded law firms from such competition in the past)
Finally, the Report includes a discussion of another observed phenomenon: the fact that the rising economic tide is not lifting all boats at the same rate. 20 firms in the AmLaw 100 and about the same number in the second hundred are far outpacing their competitors in their respective “classes.” Dubbed the Super Rich by the American Lawyer (see April 29, 2014 article (online) entitled AmLaw 100 Analysis: The Super Rich Get Richer available via Lexis), those in the first hundred grew their revenue by 20% and their PPP by almost 32% since 2008. And they accomplished this with only modest growth (5% headcount increase and only 4.3% increase in equity partner ranks).
The elite high performing firms in the second hundred increased their gross revenues by 4.6% (compared to the 1.1% growth rate for the other 80 firms in the second hundred. Their PPP increased 3% (compared to the other 80, which saw a growth rate of -0.8%).