Positive Legal Employment Undercurrents Continue: Advise-In’s Prediction of Earlier Law Firm New Associate Starting Dates is Confirmed

Last week I talked about a positive undercurrent for U.S. legal employment, namely that law firm lateral hiring jumped sharply in 2010.  I said then that I thought that the next good sign would be that many law firms that had delayed starting dates for new associates in the past year or two would likely move back to their more typical fall starting dates.

A week later, Elie Mystal at Above the Law reports that many large law firms are returning to a fall starting date, including, as one would expect, the most prestigious firms.

I got to the conclusion that fall starting dates would be the next step from a lot of experience, a strong knowledge of the legal market and connecting the dots.  If firms are increasing lateral hires, that indicates a shortage of labor in the firm market as a whole.  That development has been some time in coming—most law firm lawyers I hear from have reported a heavy workload over the last year or so, and there’s only so much productivity that any individual lawyer can have.  Lateral hires are one response to that shortage but they increase the overall labor supply very little—at best, they just move people to places where their time is more intensively employed.

If the basic problem is that lawyers are in short supply, at least in some places, the next logical response is to increase your labor supply by moving up start dates for lawyers who will be working for you in any case.  That’s cheaper than hiring a whole new person, and it also gives you more experienced lawyers earlier if you’ve already tapped the lateral market.  In addition, there’s pressure on firms who might otherwise be inclined to keep their start date later to move it up as a market-following strategy that maintains a firm’s attractiveness—not only to those new lawyers who are already committed to a given firm but also to law school classes of 2012.

That’s water soon to be under the bridge.  The next question is what it means, if anything, for the overall U.S. legal employment market.  While the rebound in start dates is a positive sign, it’s a bigger jump from earlier start dates to an overall loosening of that market.  That’s why the metaphor I used last week was the difference between surface currents and undercurrents.  The undercurrents can take awhile to change the direction of the surface waters.

In this case, that delay may be for a few reasons.  First, although law firms, especially large ones, are major market drivers, they don’t comprise the whole market, so a healthy law firm market doesn’t necessarily translate immediately into a healthier legal employment picture.  Second, moving up start dates, unlike lateral hiring, does in the aggregate reduce any labor shortage.  If a bunch of people start one calendar quarter earlier, you’ve essentially increased your labor by 25% (multiplied by the proportion of new lawyers to firm size) on an annualized basis.  That’s a bit of an exaggeration because lateral hires are more productive than new hires, so let’s be conservative and say that the number is 10% rather than 25%.  You might raise that number a little because law firms want bodies for relatively simple work during the traditionally busy pre-holiday season, but that’s quibbling.  Whatever the number is, it’s an effective increase in the number of lawyers, and reduces the need to hire new lawyers by that amount.

The question then becomes whether there is still excess demand after that increase in the labor supply.  That’s less certain, especially since the new hires will become increasingly productive.  In other words, the spike in lateral hires and earlier start dates are positive news—but they are undercurrents, and it may be a long time before those events translate into increased hiring overall, even if the demand for legal services increases.

~ by Kyle Pasewark at Advise-in Solutions on April 12, 2011.

2 Responses to “Positive Legal Employment Undercurrents Continue: Advise-In’s Prediction of Earlier Law Firm New Associate Starting Dates is Confirmed”

  1. […] the April and first quarter numbers are good news (and may indicate that the positive undercurrents I noted last month are beginning to be reflected in actual employment numbers), the ABA, as is its wont, tends to […]

  2. […] also positive news that, as we reported earlier, fewer 2010 graduates had to deal with deferred start dates.  That’s significant in and of itself, but it’s more important as a positive sign for future […]

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