Tuesday, February 15, 2011

Tiny Green Shoots In Legal Hiring

First let me say that I still think that the supply of new law grads is far too great for the number of available jobs.  There was already somewhat of an issue with that in 2007, but the economic crisis of 2008 really brought it to a head.  Law firms cut hiring by 80-90% while the number of students attending law school shot up about 30-40% - the classic recipe for disaster of fewer jobs and more people looking for them.  Stop-gap provisions that firms implemented such as "deferrals" only pushed the problem down the road.  I'll make no bones about it - for current law students the situation is pretty grim.

However, I'd like to relate a couple of aspects that I view as showing a few tiny green shoots in the legal hiring situation.  Not that the situation is going to get much better anytime soon, but at least it seems like there is some small motion to the good.  (In fact, even if we had the best economic situation that the US ever experienced, the overall hiring statistics would most likely still be pretty bad due to the disproportionate number of law students.  It's less a situation of "the economy needs to improve" and more a situation of "the total number of students entering law school needs to decline by at least 30%, and more likely 50%, PLUS the economy needs to improve."  There are just FAR too many people going to law school these days.  Alternatively, law schools have increased their class sizes FAR too much these days.)

OK, enough caveats!

Green Shoot #1 - I'm really busy - and so are most other lawyers that I know.  I just had the busiest late December, January, and early February that I have had in years.  I would say at least 5 years.  Definitely pre-downturn.  I would say that I have only had a few years as busy since I have been in practice.  Too busy, really (it's the primary reason that I have not had time to post more) - and so are most of the lawyers that I work with.  That's good news for legal hiring because once lawyers are sick of being too busy and it looks like the pipe is going to keep them too busy for the foreseeable future, then they get more interested in hiring additional people to shoulder some of the load.

Green Shoot #2 - Clients seem to be a lot less nervous.  I think that this stems from having a few quarters of solid profitability behind them.  The fear and uncertainty of the economic downturn has lessened.  That same fear caused them to really cut down on their legal expenses and hoard cash during the downturn, but clients seem to be spending more now.  Not that they are spending recklessly, but they seem to be starting to think about putting their money to work rather than just hoarding it.  As you might expect, when clients want to put money to work, it usually means legal work - build a new plant?  Acquire another business?  They will need legal help.

Green Shoot #3 - Hiring seems to be up slightly.  For example, we greatly decreased our number of summer associates during the downturn (about 50-60% decrease), but for the first time since the downturn we are increasing the size of the summer class.  The increase is not big - maybe 10-15% - and it is still far below the pre-downturn class size, but at least it is increasing.

Green Shoot #4 - This one may be kind of subtle for people, but not only is the class size increasing, none of the other partners are screaming about it.  This is a marked contrast to previous years since the downturn when it seemed like there was some fringe to the "bell curve" of views that was pushing for total termination of the summer program - probably in favor of laterals.  There is no more pressure in that direction.

Green Shoot #5 - We don't seem to be alone.  Talking with people from other firms, I get the feeling that some are still hurting, but it seems like the majority are stable to slightly positive with regard to their hiring, like us.

Green Shoot #6 - The Robert Half Legal Survey asked - "Does your law firm or company plan to increase or decrease the number of full-time legal personnel on your staff during the first quarter of 2011?" - and 31% of the respondents indicated "Increase" - and only 1% of the respondents indicated "Decrease".  Admittedly, 58% indicated "No change" and 10% didn't know, but it's still a pretty positive ratio between increase and decrease and virtually no one is actually looking at a decrease.

So what does it mean for law students?  Bottom line is that I would expect that the number of hiring spots would be a little higher this year.  If the total number of law students remained constant from year to year, then the increase in number of jobs would lead to a slight increase in the number of lawyers hired and a better "hiring rate."  However, my impression is that the law schools have been increasing their class size year-over-year.  If the law school class size increase exceeds the hiring spot increase, then the net impact on hiring rate will be negative - and that is still a possibility.  However, I think that it is more likely than not that the hiring increase will exceed the law student increase (at least by a little).

Bottom, bottom line - for the first time since the economic downturn, the hiring odds are probably not going to get any worse and may be improving slightly.  Green shoots - but still tiny.


  1. First off, I am glad that you have been quite inundated with work. It is usually a good sign when one does not have enough time to be idle and blog like myself.
    Secondly, you are right to a point, that there are green shoots in the economy, but I see this as more of a "Wiley Coyote" moment than anything else. Why? First, housing is still in the doldrums, prices are dropping in areas that no one expected to be affected. How does this aspect of the economy affect the legal field. Well, in every recession/depression (This is a depression, very similar to that experienced by the U.S. in the 1870's) housing has been the first to go under and the first to recover. With house prices still falling, the green shoots will be short lived because as more and more people go under water for their mortages, banks then take on more and more worthless property, then becoming "Zombie Banks"; the whole cycle starts itself over again.
    Additionally,you are right on the aspect of there being too many law grads. In my estimation we should either cut the number of law grads or law schools by about half. The bi-modal salary distribution for starting lawyers will still be in place, but hopefully more of them will at least be able to attain a legal job. Keep up the good work

  2. Thanks for your comment! I agree with you that historically housing has been the first to recover. What then to you make of the seemingly solid profitability of large US companies? I understand that the SP500 has (on average) about 30-40% of its revenue coming from operations outside the US. Do you think that is it?

  3. Well US companies are strong because they have as much, if not more, production and consumption in the BRIC countries (Brazil, Russian, India, & China) abroad as they do here. However, you have rising inflation in China, India's growth seems to not so much have plateaued, but is slowing. Honestly though, the world economy is as complex as string theory, there is so much of "The Fog of War" going on now (Look at the flash crash from last year) that no one really has a crystal ball. But to go back to your question, I think the reason that US companies have strong profitabiliy is because of what is stated previously, that they have been moving production off shore for decades.
    The main issue with this economy is that there are fundamental, structural flaws with it that have not really been worked out. The stimulus was basically akin to giving a Heroin addict methodone, in that, that person/economy still has the same fundamental problems, we are just trying to ease them off of the drug (Quantative easing!!!) This never works, my grandpa was a cop, once a junkie the only way to quit is go cold turkey. Thats the main issue, you have all of these systems in place which are still functioning in the same manner that they did prior, its only a matter of time before we slide back into negative growth again

  4. In terms of the structural flaws, are you referring to just the cost of housing or more?
    Inflation seems to be OK, commodity pricing seems OK.

    With regard to the stimulus, I think that you are right that it has not previously worked - at least on this scale. However, I don't know that it has previously be tried on this scale?
    You certainly highlight an important point that now as we seem to be recovering we are going to have to start tightening our belts or be in a world of hurt.

  5. In terms of structural flaws, god, where do I start. The Feds have at least been doing some action (Slowly taking away Fannie & Freddie away from housing). However, we have this student loan bubble which is just simply getting bigger and bigger.
    In regards to Inflation, yes, it isn't rising like a rocket, yet, for the past decade, wages have remained flat, so that is a key problem. An example of this is the UK, where prices of goods are rising twice as fast as compensation. Here in the US, we have seen wages drop to the purchasing power of earners falling at rates that are just startlingly.
    I had an interesting conversation with my Irish relative and he said that even though the Republic is royally screwed, the Irish have always been a people who are not afraid to admit when something is beyond repair/failed. He stated that we Americans are now very similar to the Japanese in their "Lost Decade," in that we are unwilling to admit that we probably did fail. This "zeit geist" just merely exacerbates the underlying problem, a flawed system. There comes a point when one has to accept the realities of the situation. If not, I fear someday that what has occurred in cities like Detroit, Cleveland, St. Louis & Stockton, will soon be the norm rather than the exception.