But how long can it last?
The post Hiring Up, Productivity Up, Demand Up… Everything’s Coming Up Roses For Law Firms appeared first on Above the Law.
After weathering the economic catastrophe brought on by a global pandemic and lockdown by notching record profits, law firms have regressed a tad over the last couple years, but those days look to be over with law firm financial figures humming.
The Thomson Reuters Q3 2024 Law Firm Financial Index is out and the last quarter couldn’t have turned out better for law firms. While we’ve seen firms turn out consistently positive quarters for a while now, there’s usually a hefty reliance on increased rates (which is fair, as they’ve historically lagged behind inflation) as demand remained sluggish. But that’s not an issue this quarter, with demand up 3.6 percent.
Litigators and real estate practices drove that growth last quarter, with all practice areas citing improvement except intellectual property, which had an almost imperceptible decline.
And with good economic news came good hiring news, with every segment except the Am Law 50 (who stopped shrinking slightly) upping hiring, but none more than the midsized firms.
Hiring is up… and productivity with it. This reverses the last couple years where hiring growth corresponded with productivity dips. It’s 2024, so obviously there’s an AI angle to all of this:
“The continued climb in law firm average productivity – in stark contrast to previous years – is a key factor boosting law firm profitability,” said Raghu Ramanathan, president of Legal Professionals, Thomson Reuters. “Law firms that not only invest in new technology but also adopt AI and generative AI solutions to streamline workflows and improve the efficiency and quality of their work will be best positioned to improve client satisfaction and experience sustained productivity growth.”
As the report notes, the good times aren’t likely to get much better in 2025, diplomatically described as “latent challenges that might erupt.” But even if someone were to, I dunno, decimate the construction market by arresting half its workforce or obliterate the manufacturing supply chain by driving up the cost of overseas components, firms appear to be on solid footing and “not looking to experience the overheating and corresponding two-year hangover which beset them after 2021.”
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
