Wednesday, October 26, 2011

Inching In The Right Direction

It's been a few weeks since I last posted - but that's actually good news for the younger set.  Frankly, the busier practicing lawyers are, the more likely they are to hire younger lawyers to take some of the load off - and it seems like the majority (although not all) of law firms are continuing to inch back from the recent decline in business.  (Note -  it is "inching", not "leaps and bounds".)

Don't get me wrong, going to law school is still not a good idea right now due to the mismatch in terms of number of graduating lawyers and number of jobs available (even the WSJ admits that the legal field is the MOST difficult for placement of any field - with fewer than one job opening per 100 people employed in the field).  However, job placement odds for those graduating in spring 2012 are likely to be slightly better than 2011.

How much better?  Last year I reviewed the NALP data (which is self-reported by law schools and typically paints an overly rosy picture) and we found that only about 40% of law school graduates got a "real" lawyer job (not part-time, not temporary, and they were satisfied with it) while another 20% got kind of an "unsatisfactory" lawyer job (not part-time, not temporary, but they were unsatisfied and continuing to interview).  That's about 60% of the graduating class getting at least SOME job as a lawyer, even if unsatisfactory. 

The class of 2011 data does not appear to be out yet, but I would expect it to show a single digit improvement for the class of 2011 - maybe about 5% in total hiring (60%->65%) with the majority of that increase coming from lawyers getting "real" lawyer jobs.  From my conversations with lawyers at other firms, it seems like the trend that I noted here in early 2011 did indeed come to pass.  I would then expect to see a similar increase in hiring for the class of 2012.

So where does that get us?  I would predict that for 2012 graduates you will see about 50% employment in "real" lawyer jobs and about another 20% in "unsatisfactory" lawyer jobs for a total new grade lawyer job hiring rate of about 70%.  That's a welcome increase, but not a green light for going to law school - I would describe it as "the law students are slightly less screwed."

Keep in mind that the average salary for a lawyer job fell significantly from $72K in 2009 to $63K in 2010.  We are likely to see some increase from $63K in 2011 and 2012 due to the increased hiring and better quality of jobs being offered, but I don't think you are going to see it get back to $72K for 2012.  Additionally, in order to catch up in real dollar terms to the 2009 salary (assuming inflation of 3%), the 2012 average salary would have to be about $78.6K - and that's certainly not happening.

A favorable trend that I note is the 10% decrease in the number of law school applicants this year and the 18.7% decrease in the number of LSAT takers.  However, this is a decline from the wildly inflated number of people that have applied to law school and taken the LSAT in the last few years. It should also be noted that we are still talking about 78,900 applicants for about 45,000 law school seats.

Here's an interesting calculation (although admittedly simplified and fudging some factors) that might help provide some insight into the supply-demand mismatch - take the 45,000 law school seats and apply my proposed 2012 ratio for lawyer jobs of 50%/70% (22,500/31,500) and compare it to the number of law school applicants.  We find that of the 78,900 people applying to law school this year (the supply), their odds of getting a "real" lawyer job is (22,500/78,900 = ) 28.5%.  Ouch.

Also, note that as long as the number of applicants (78,900) exceeds the number of law school seats (45,000), we are unlikely to see a sizable net reduction in the number of graduating law students.  Law schools are likely to continue "filling their classes," although likely with people that are not as well qualified, because they need to keep bringing in the money to stay open.  I really think that we need about another 30% decline in law school applicants (putting the number at about 55K) for an impact to really be felt.

In general, decreasing numbers of law students and incrementally better hiring are steps in a good direction.  However, we are still just inching in the right direction - and we have a long way to go before law school becomes a reasonable financial decision.

For another take on this (although generally in agreement) from a lawyer with a lot of practice experience, check out this article.

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