We draft this column by starting with the relevant articles from the past week in the legal sector, then tying in the broader economic data. We were quite happy to see that the law-firm layoff numbers this week were good – perfect, in fact – a week without layoffs for just the second time this year (the other was the week ending August 14).
And we weren’t the only ones pleasantly surprised. For the third straight week, initial jobless claims declined, down to 530,000 against an anticipated 550,000. Continuing claims also declined, but as we’ve said repeatedly, that seems to be more the result of benefits running out and people giving up (which means they no longer count as unemployed, in a bizarre example of government logic), than actual job creation.
After the jump, we turn to the legal sector.
The big news in the legal sector was the PwC report on the top UK firms, which concluded that they have “weathered the storm,” and the worst is in the past.
PwC’s quarterly benchmarking survey showed an 18% rise in profits per equity partner (PEP) since January at the 10 largest firms, and a 41% surge at the top 11 to 25 firms. Profit margins also saw a boost in firms of all sizes.
Commentators said firms were finally reaping the rewards of staff cuts and were seeing an increase in the volume of work.
In the three months to 31 July, equity partners at the top-10 firms earned average profits of £181,000, up from £154,000 in the first quarter to 31 January. PEP in the top 11 to 25 firms rose from £56,000 in the first quarter, to £79,000 in the July quarter.
Firms throughout the top 100 saw a rise in profit margins, which soared by 36% at the top-10 firms, and rose by almost a third at the top-25 firms.
Frankly, that’s contrary to a lot of what we’re hearing out of the US firms, which are still looking to cut costs even as they retain earnings to gird against future downturns, with White & Case a prime example of that.
Technically, we can’t count them as layoffs because they never got the chance to work, but the bodycount from the Class of 2009 continues to rise. Arent Fox is the most-recent offender, rescinding offers to 12 members of that class, who had already been deferred until next year anyway. They’ll get $20,000 for their troubles. At least they made a clean break. Alston & Bird’s incoming class is on indefinite deferral.
As has been the trend lately, firms continue to look to cut costs in other ways. Dorsey & Whitney is now hinting that lockstep may be next on the chopping block, having already laid off staff, cut salaries, canceled its summer program, and given offers to only 56% of this year’s summers. Wilson Sonsini at least had the decency to announce staff cuts publicly, which a whole host of other firms have done on the down-low.
Bloomberg has shown a surprising interest, for the mainstream media, in the trials and tribulations of lawyers and law students. This week we got word that OCI offers were down (only) 20% at Harvard. Reports from the TTTrenches are far far worse.
On the brighter (but not this mindlessly bright – we hate vapid, generic optimism) side, the Brooklyn DA Charles Hynes is hiring 30 deferred associates, with their comp being covered by their firms. That’s approximately $2 million of free labor for the people of the Empire State. New York courts can also avail themselves of deferred associates, thanks to a recent opinion by the Advisory Committee on Judicial Ethics, but those participants will have to forego their stipends.
And there’s always busking – two London lawyers earned more money in 40 minutes playing music in a subway station than the hourly rate legal aid pays out.
That’s a far better option than insider trading, as one particularly inept former Nixon Peabody associate learned.
11,732 (4,474 / 7,258) people have been laid off from law firms in calendar 2009
371 (156 lawyers / 215 staff) have been laid off in September