Yesterday morning I got back to New York on the redeye from Seattle where I’d been at the annual NALP conference, attended by well over 1,000 people involved in career services from law firms and law schools. (I was there figuratively wearing my JD Match hat, not my Adam Smith, Esq. hat.)
For those of you unfamiliar with NALP, it’s the association for legal career professionals, headquartered in Washington, DC, and per their tagline, their mission is “we advance law careers.”
This isn’t a column about NALP.
Rather, I’d like to share with you a moment of insight delivered in a smallish presentation room by NALP’s executive director, Jim Leipold (disclosure: I’ve known Jim for years and consider him a good friend and conscientious advocate for the best interest of the industry). Jim had just finished going through a presentation recapping the annual job statistics for law graduates aptly summarized by the National Law Journal as “We’re not going back to 2006.”
One of NALP’s great assets and ongoing contributions to Law Land is its long-running, comprehensive data series on employment and job outcomes, particularly for law students entering the market. I know of no data series comparable in scope or span of years.
Here, some of Jim’s slides were sobering. Just a few examples:
- The unemployment rate among all US law school graduates 9 months out doubled from about 8% in 2007 to nearly 16% in 2012.
- On Campus Interviewing (“OCI”), traditionally a bulwark of student/employer matching, and certainly the traditional forum for the top level of the market to clear, dropped at least as precipitously: In 2008 37% or more than one in three and nearly two out of five of all jobs were obtained during OCI, but in 2011—2012 barely more than 20% were, or about one in five.
- The median number of summer associate job offers extended by BigLaw (in Jim’s data set, firms of more than 100 lawyers) was also down by about 50% from the 2007 peak: For example, in the largest slice of the market, firms over 700 lawyers, from 30 offers in 2007 to about 11 or 12 in each of the past four years.
- For law firm jobs obtained during OCI, the numbers were also pretty much cut in half, from 24.4% in 2008 to about 13% in 2011—2012.
For those of you who follow these markets, this is updated and fresh data, but hardly anything shocking given what we’ve gotten used to since the Great Reset.
The interesting part came when Jim presented a chart going back nearly five decades (1968—2013) showing total number of LSAT’s administered, law school applicants, and 1L’s.
Let’s suppose that there has been a significant secular decline in the demand by Giant Corporations (call them “GCs”) for the services of large law firms, partly because the overall volume of legal work has been going down, and partly because the GCs have found other suppliers of legal services, which may be smaller law firms or non-lawyer service providers. The common result is that there is less legal work for lawyers in large law firms. My guess is that the work is down about 20%.
In that case one of three or four things should happen:
1. Most or all of the large law firms will survive, but with only about 80% of the lawyers they used to have.
2. About 20% of the large law firms will close, their lawyers will leave Biglaw, and the remaining 80% of the firms will keep about the same number of lawyers.
3. The large law firms that don’t enjoy product differentiation (e.g., firms that aren’t Skadden, Wachtell, or Cravath) will cut their prices to attract back the work to keep their lawyers busy, until they become price-competitive for GCs choosing between Big and Big Enough.
I expect the outcome to be somewhere between 1 and 2: maybe 10 of the largest 200 firms will shut down, and many of the survivors will downsize. Because of the nature of law firm management and lawyer egos, I think that this result is more likely than the big law firms accepting that, like their clients, they are subject to market forces.