After a great 2024, firms can either come back to reality or ride the coming storm to greater heights.
The post Law Firms Face Uncertain Economic Future In 2025 appeared first on Above the Law.
The newly released 2025 Report on the State of the US Legal Market, prepared by the Center on Ethics and the Legal Profession at Georgetown Law and Thomson Reuters, doesn’t quite know what to expect for firms this year.
On the one hand, a “lucrative 2024” placed the economy on sold footing and many of the key factors driving that growth should continue to hold over the coming year. On the other hand, it’s hard to sustain growth like the industry enjoyed.
And on the other other hand…
The report also states that firms will likely see demand weaken in 2025, compared to 2024, due to both the historic difficulty of achieving long-run demand growth plus uncertain conditions in the U.S. and global economies. However, the report notes that results of the U.S. presidential election could boost demand as greater levels of economic and geopolitical instability generally see clients turn to their lawyers to mitigate risk. In addition, the 2025 outlook includes expense growth remaining at elevated levels, putting more pressure on profits.
Ah. The “chaos is a ladder” theory of law firm demand. You have to credit Thomson Reuters for using roughly 30 words to say, “clients need lawyers because of the tire fire of trade wars and half-baked deregulation you all voted for.” Will deal lawyers thrive in a corporate free-for-all or will litigators squabble over business commitments trashed by a global trade war? Either way, the firms win!
Until the economy collapses anyway.
Future aside, the report suggests that firms owed 2024’s boom to a “year of anomalies.” Growth arrived simultaneously from transactional and counter-cyclical practices in a sort-of everything, everywhere all at once effect (without the interdimensional war for survival).
Major transactional practices — corporate (all), real estate, and tax — that were all drags on firm performance in 2023, improved significantly in 2024. The result was a transactional category that, as a whole, rebounded from a 2.3% contraction in 2023 to 1.6% growth as of November of 2024 on a year to-date basis. Although transactional demand has not yet fully recovered to the heights of 2021, the fact that it is now returning to growth mode means that counter-cyclical practices that have performed exceptionally over the past few years will no longer experience as much drag from transactional work.
Indeed, if counter-cyclical practices (such as litigation) had simply maintained their growth paces in 2024, law firms would already have performed better than the previous couple of years. Instead, what happened was an acceleration.
Along with this demand bump, firms were able to boost rates, “averaging 6.5% growth despite weakening inflation.” While the report says “despite,” this fits within the industry’s overall lagging nature. Recessions hit law a little later, recoveries arrive a little slower, and inflation takes a bit longer to absorb. Expenses also steadied in 2024, meaning firms saw more demand, willing to pay more, while the expenses got easier to manage (if still high).
It’s hard to shoot the moon twice in a row.
But chaos is a ladder.
2025 Report on the State of the US Legal Market [Thomson Reuters]
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.
