Better Job Prospects for Entering Law School Students? A Medium-Term View of the Legal Employment Market

Law School JobsIn response to the Am Law Daily’s report earlier in June that the legal industry has lost approximately 22,000 jobs since May 2009, a comment from Gordon asked, “What does this mean for me? I will be a 1L in the fall. By the time I graduate in 2013, will the legal sector be back on its feet?”  Although the medium-term of three and four years can’t be predicted easily, there are general market historical patterns that, when linked with less historical assumptions, can produce an informed opinion:  2013-14 law school graduates are more likely than not to find themselves much better-positioned than 2009 and 2010 graduates.

Overview of the Current Market.  Let’s start with the current market.  There’s the loss of 22,000 jobs in the last year.  (Let’s not pass by some qualified good news—a small net gain in legal jobs in May 2010, some signs of improvement in parts of the southeast and more optimistic hiring plans in the third quarter of 2010, which we noted in a recent blogpost.)

A significant data point in the current market is that law firms (major drivers of the legal market) shed, by one estimate, about 5,800 lawyer jobs from the beginning of 2008 to approximately the end of the first quarter of 2010.  About 4,700 of those cuts came in 2009.  And of corporate clients, a major source of law firm business, 2.5 times more plan to reduce their use of outside law firms in the third quarter of 2010 than plan to increase it (25% vs. 10%).

The Market for 2013-14 Law School Graduates.  None of that is good news for lawyers trying to start practicing now.  But Gordon’s question was about prospects for those just starting law school.  For them, the market is likely to be better (though not as frothy as from 2005-2007).  For new graduates, it’s largely a matter of the number of bodies available to do the work law firms, companies and governments will require.

Why is the supply and demand curve likely to be better for starting lawyers a few years from now?

First, because of the way law firms respond to the larger economy.  Law firms generally have been one to two years behind economic curves.  In the current crisis, it was closer to one.  The vast majority of cutbacks occurred in 2009, while the major economic damage (in case you’ve forgotten) became noticeable in 2007 and precipitous in 2008.  Law firms responded relatively quickly this time but not as quickly as some other sectors.  So, when (if) the economy picks up, law firms will probably be a little behind that curve as well.  The later the economy turns consistently positive (within limits), the better for Gordon and his colleagues.

Second, precisely because of the current market.  Publicized layoffs are not the only important element of this down period.  A lot of firms at all levels (though perhaps not all those rumored to have done so) engaged in “stealth” layoffs.  Moreover, few firms are hiring as many new associates as they did during the last decade.

There has also been the normal attrition that occurs in the ordinary course at major law firms.  After a few years, the vast majority of associates at such firms leave to pursue other careers, take in-house jobs, accept government positions, begin solo practice or move to less high-profile firms.  In normal economic times, attrition is one of the two main drivers of firm hiring (the other is increasing business)—firms replace departing associates with new.

During the last few years, attrition patterns have changed significantly.  For those firms who didn’t lay lawyers off, attrition has probably actually slowed.  Why?  Because those who would ordinarily have jumped ship had nowhere but the deep water to land, so have stayed on board.  In addition, because of the lack of demand, those who did leave (like me) generally weren’t replaced by lateral hires (or as noted above), new associate hires.

Our Hypothesis (and One Big Assumption).  All of that means that it’s likely that firm hiring will return to more normalized levels by the time this year’s entering law school class graduates.  Law firms are likely to simply need a lot more bodies to handle the work than they have available now.  (For 2013 graduates, by the way, summer 2012 is also a key time (for summer associate positions after the second year of law school); for 2014 graduates, the summer of 2013.)  Prestige firms are likely to return to more normalized hiring patterns; less prestigious firms may find themselves with even greater needs, since some of their best current people will be picked off by elite firms.  As law firms soak up more potential hires, that will clear space in other realms (e.g., government and other private practice) as well.

Now, I don’t think it’s likely that we’ll see a return to the same high-altitude hiring patterns that we saw in the middle of the aughts—but at least the market is likely to get off the mat.

All of this is subject to a pretty significant assumption—namely, that the economy turns around and that legal hiring personnel have confidence that the bad times are gone for the near future.  No one can predict or guarantee that.  Robert Reich, the former secretary of labor, thinks chances are high for a “double-dip” recession.  And law firms, particularly on their corporate side, depend on their clients being able to obtain significant transaction financing.  Moreover, the woeful current economy may delay certain corporate deals that would otherwise have been made sooner.  For example, the Financial Times reported on June 14 that Texas Pacific Group, the colossus private equity firm, has written down many of its boom-period investments by almost 50%, which will delay its exit from those investments.  For how long is hard to say.

But if—just if—the economic news, particularly for corporations and law firm clients, gets better, there will be huge personnel holes to fill, and those entering law school in 2010 and 2011 may be well-positioned to fill them.  And if the news is better sooner, well, those now entering law school now may not catch the crest of the wave, but the water should have returned to non-drought levels.

So, Gordon, you and your colleagues have somewhat better prospects.  But there are no guarantees and, in view of the high debt levels most people find it necessary to incur to attend law school, anyone thinking about law school should consider it carefully before committing.

~ by Kyle Pasewark at Advise-in Solutions on June 19, 2010.

15 Responses to “Better Job Prospects for Entering Law School Students? A Medium-Term View of the Legal Employment Market”

  1. […] sound sure-footed (think of how many times MSNBC and Fox Business talking heads are wrong).  We posted on June 19 Advise-In’s current view, subject to significant assumptions, that the employment […]

  2. […] that the legal industry is acting countercyclically at this point (which isn’t a surprise, as we’ve pointed out before).  The economy overall has been adding a small number of private sector jobs—but not in the […]

  3. […] let’s assume that for those entering law school this year or next, it will be better again, though likely not what it once was—a lot of press was dedicated to lawyer […]

  4. […] of the legal employment market and careful thinking about why they wanted to be lawyers.  As we’ve said, the risk that the legal employment market will fail to recover (or fail to recover much) could […]

  5. […] Unrealistic Self-Assessments a Factor in Rise in Law School Applications? There’s been a lot of press, some of it here and on our website, about the continuing rise in law school applications at a time when the economy and the legal market are troubled.  There’s always been a mismatch in linking current applications and the current legal market; after all, for entering law students, the first key benchmark for the state of the legal employment market is their second year of law school.  The current economy isn’t necessarily a great proxy for that future market, it’s just the basis on which one makes reasonable assessments of what that future might hold. […]

  6. […] great news for 2Ls overall, and consistent with Advise-In’s qualified optimism about the legal employment market in the medium term, i.e, for those about to enter law school in […]

  7. […] news, provided that the economy as a whole regains its footing.  Part of the reason for that, as we’ve said before, is that if there’s a rebound in the economy—and therefore in the drivers of demand for […]

  8. […] picture, upon which increases in legal employment will largely depend, and on which Advise-In’s cautious optimism regarding the medium-term (2013 and 2014) legal hiring markets also depends.  US economic growth […]

  9. […] I mention it; when there isn’t, I’m cautious about predictions.  The current data make our medium-term view on the legal employment market (that the 2013 and 2014 markets are likely to be somewhat better than the 2009-2010 markets, but […]

  10. […] Jobs are scarcer than they were a few years ago.  The number of legal jobs may or may not increase in the next few years but it’s very unlikely that the easy transition to a career that was possible for many during […]

  11. […] I gave Advise-In’s medium-term prognosis for the legal employment picture early in the summer, I indicated that I thought the most likely […]

  12. […] for 2010 law school graduates is grim.  Last year, I advised that my best guess was that the U.S. legal employment market would not recover for the class of 2010, i.e., the 2011 market would not show many positive […]

  13. Although jobs in the legal industry may be returning, the real problem is the average salary in comparison to the debt accrued via law school. Many people watch movies about lawyers and think “Now there’s a lucrative field of work” and don’t realize that even though the starting salary than that of someone working in the banking industry for example, and that’s not even a guarantee now a days, you are carrying with you on average over $100k in debt. Believe it or not this has to be paid back and cannot be excused in bankruptcy. So what’s the result… A lawyer who has a starting salary of $50k-$60k is really only making $35k-$45k thanks to the high student loan payments your making monthly. The problems lies in school tuitions and the ABA has done nothing to correct it. In fact they have have the matter worst about continuously giving new schools ABA accredation. Not only does this enforce the idea that charging high tuition is ok, because most of the newly accredited schools are private and therefore expensive, but they also flood the job market with cheap labor. Somebody coming from a tier three school is willing to make half of what a person coming from a tier one school. That’s the equivalent of outsourcing to China, why not pay for cheaper labor. My suggestion is not to go to law school, the job market is just not the same. If you are going to go to law school though I suggest either attending a top ten school or a state school. At least with a state school your debt won’t be as high but trust me, you’ll still owe close to $100k after its all said and done.

  14. Although jobs in the legal industry may be returning, the real problem is the average salary in comparison to the debt accrued via law school. Many people watch movies about lawyers and think “Now there’s a lucrative field of work” and don’t realize that even though the starting salary than that of someone working in the banking industry for example, and that’s not even a guarantee now a days, is lower than a starting attorney, you are carrying with you on average over $100k in debt. Believe it or not this has to be paid back and cannot be excused in bankruptcy. So what’s the result… A lawyer who has a starting salary of $50k-$60k is really only making $35k-$45k thanks to the high student loan payments your making monthly. The problems lies in school tuitions and the ABA has done nothing to correct it. In fact they have made the matter worst by continuously giving new schools ABA accreditation. Not only does this promote the idea that charging high tuition is ok, because most of the newly accredited schools are private and therefore expensive, but they also flood the job market with cheap labor. Somebody coming from a tier three school is willing to make half of what a person coming from a tier one school. That’s the equivalent of outsourcing to China, why not pay for cheaper labor. My suggestion is not to go to law school, the job market is just not the same. If you are going to go to law school though I suggest either attending a top ten school or a state school. At least with a state school your debt won’t be as high but trust me you’ll still owe close to $100k after its all said and done.

    • This is a very helpful comment and perspective, thanks. As you know, I’ve put up a lot of posts about law school costs and there’s a page on the Advise-In website that details them.
      The cost of law school is unquestionably high, and that is one reason why it’s important, if you want to go, to get your best LSAT score and submit your best application package. There is a lot money available.
      But law school is still a significant investment of time and, usually, of money. I think the major point is that if you’re thinking about it, you want to be confident that this is the career you want. If it is, the economics still matter—a lot—but if it’s a passion to practice law, they matter a little less. If you’re going to law school as strictly a monetary decision, then everything this post says above is correct, in my view. Law can be a relatively lucrative career, even in this down market, but the risk is higher than it once was. A lot higher. And the debt stays, regardless of whether your bet pays off.

      Kyle Pasewark, Founder
      Advise-In Solutions

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