It was the best of times; it was the worst of times.
The mixed messages of today’s legal market
The state of today’s legal market has and will continue to be a deeply discussed topic. People considering attending law school want to know whether the decision will be the right one. Students graduating from law school want to know whether they will gain employment upon graduating. Those already in the legal profession look for reassurance that the legal market is stable. And in light of the ABA releasing its annual employment summary, there is good news, bad news, and mixed news.
Today, the job market is far less kind to lawyers and those graduating with a law degree.
Anyone who is vaguely familiar with the legal profession will know the bad news: the job market is not what it used to be. Stories have been told about the pre-recession legal market. It was a seller’s market. The majority of law graduates had a job waiting for them when they graduated. A report (PDF) created by Georgetown Law’s Center for the Study of the Legal Profession, in describing the legal atmosphere before the recession, said, “The fundamental decisions about how legal services were delivered . . . were all essentially made by law firms . . . by and large all of the key decisions relating to representation were made by outside lawyers.”
For better or worse, this previous trend has changed dramatically. Lawyers – and those graduating with a law degree—today have significantly less decision-making power and are having to market themselves more than ever. Although these circumstances may be less than ideal for the modern attorney, they are extremely inviting to those looking for legal advice. Today’s legal market has been described as “a buyer’s market” due to a decreased demand for legal services.
Currently, the national expense growth rate for law firms is at 2.1 percent, a percentage that mirrors the national demand growth rate for legal services.
The reduction in demand occurred in 2008, when struggling businesses looked for areas in which to cut costs. Business expenses were slashed in all areas but particularly in the legal budget. Fewer companies were seeking legal advice, thereby decreasing demand for legal services. Consequently, those offering legal services began to offer a more client-friendly product in order to nab the remaining clients. For example, clients have taken further control of organization, scheduling, staffing, strategy, and billing within law firms. This sequence of events gradually created the buyer’s market we know today.
As another result of the recession, law firms across the country cut their spending dramatically. According to Georgetown Law’s report, law firm expenses in 2007 “were growing at an average annual rate of 18 percent,” but in 2010 the expense growth rate hit an all-time low: -8.2 percent. Basically, law firms saw their clients cutting expenses (or going out of business) and reacted accordingly. Currently, the national expense growth rate for law firms is at 2.1 percent, mirroring national demand growth rate for legal services.
Demand growth has been slow, but some legal fields have faired better than others during this slight economic upswing. For example, the Georgetown Report estimates that over the past two years, real estate as well as labor and employment practices have seen the most growth, while – ironically – Bankruptcy has seen the least demand growth, presumably because bankruptcy filings were at an all-time high in 2010.
“Jobs for those who draw miscellaneous income as lawyers have grown 25 percent since 2009.”
The legal market is not good, but it appears things are changing. While the year 2013 ended with an overall decrease in demand for legal services, the last three quarters of 2013 saw an increase in demand for legal services. This increase came despite the year starting with “a sharp decline in the first quarter.”
Slow-growth demand for legal services combined with hesitant spending has created an interesting market for new graduates. Joshua Wright, Senior Editor for Economic Modeling Specialists International (EMSI), recognized this market in his article titled The Oversaturated Job Market for Lawyers Continues, and On-The-Side Legal Work Grows. He writes, “Take away full-time, salaried positions and the real growth in the lawyer job market has come from those working on the side in part-time arrangements.”
Although these part-time arrangements are less than ideal for law school graduates, it is certainly an improvement from two years ago when law firms were not hiring and were shrinking at an exponential rate in order to remain solvent. In fact, part-time employment in the legal field has seen rapid expansion. EMSI has determined that “jobs for those who draw miscellaneous income as lawyers have grown 25 percent since 2009.”
In Mr. Wright’s article, he notes that the national supply of lawyers far surpasses the estimated amount of legal positions available, and the states share similar numbers. For example, according to the National Center for Education Statistics and EMSI’s 2013 job opening’s dataset, North Carolina fares slightly worse than the average state. The estimated number of job openings (defined as salaried employees and self-employed) in 2013 was 485 while the number of law graduates for the year 2012 was 1,427. This comes out to a ratio of 2.9 graduates for every job opening. It sounds bad, but it could be worse. Vermont’s ratio is 7.9. And notably, North Carolina has experienced a two percent increase in job openings since 2010.
A Juris Doctor, even in today’s market, is worth roughly one million dollars over the course of one’s career.
But, all is not lost for those currently working on obtaining a Juris Doctor (J.D.). Jordan Weissman Senior Associate Editor at The Atlantic wrote that a J.D., even in today’s market, is worth roughly one million dollars over the course of one’s career. He draws his numbers from a draft paper written by Seton Hall Law Professor Michael Simkovic and Rutgers economist Frank McIntyre. The study finds that “while legal salaries have tumbled and unemployment has risen . . . lawyers seem to have essentially maintained their advantage over their less educated peers.” Even when the economy took a downward turn, those who obtained a J.D. saw their earnings premium increase.
Some might assume that these numbers are skewed because lawyers at the upper end of the salary spectrum make up for lawyers at the lower end, but this is not the case. The report “calculates that a worker at the 25th percentile of law grads makes $17,000 more per year than a worker at the 25th percentile of earners with just a bachelor’s.”
The days of gloom and doom appear to be over, but that certainly does not mean everything is on the right track. The legal market is crowded with lawyers, and full-time legal positions are not readily available for those graduating with a J.D. But for those looking for work, part-time employment is on the rise and could lead to full-time employment as the legal market responds to an apparent increasing growth in demand. While low demand growth and hesitancy on the part of the employer has created the market for part-time employment, over time the hesitancy to expand will subside and part-time work should turn into full-time employment.