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The legal market is facing the largest quarterly drop in performance since the Great Recession, with demand for legal services dropping 5.9% from the same point last year, according to the Q2 peer monitor index from Thomson Reuters.
While the first quarter of 2020 managed to stay strong in the face of the pandemic, court closures and business shutdowns in Q2 exhausted the economy and the legal market was unable to remain safe.
The PMI plummeted by six points to 51, with demand for legal services facing its most drastic quarterly drop since 2009, down 5.9%. Major practices saw notable declines. Impacted by court closures and case delays, litigation dropped 7.5%. Corporate work slipped 5.5%, real estate down 12.2%. and tax work falling 9.1%.
“These are unprecedented times for the legal industry,” said Mike Abbott, vice president of market insights at Thomson Reuters. “While many firms are successfully adjusting their business models to work-from-home, they are still subject to the volatility and uncertainty surrounding their clients as well as the overall economy.”
Other practices saw more modest declines, such as labor and employment, which fell 4.4%, and patent prosecution, which was down 2.5%. Bankruptcy was one of the few practices that saw an increase in demand, surging 6.2% in the quarter.
“We see law firms making rapid adjustments to better suit the current conditions – investing in productivity-enhancing technologies such as collaborative and remote work solutions while reducing expenses in other areas such as overhead.”
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Within this drop, the average rate rose 5.2%. However, Peer Monitor analysis revealed this increase is a result of the reduced workload shifted from associates to partners, raising the average hourly billing rate.
Bill Josten, manager of enterprise content for Thomson Reuters told Law.com that hours worked dropped for associates and partners, but the dip in hours was larger for associates. Something similar happened in the Great Recession.
“We are seeing a reversion back to prior behaviors,” Josten said. “If you go back five or six years as firms recovered from the Great Recession, there was a lot of discussion of a lost generation of associates. Partners stopped pushing work down to them. They didn’t hire as many, and they didn’t get trained in the same way. That is why the lateral market is so competitive for young partners now.”
“More uncertainty lies ahead in the coming months, but firms are clearly making efforts to improve efficiency and flexibility to deal with what’s to come,” Abbott said.
