The National Law Journal has put out its 2009 survey of the largest firms in the US, and the numbers are just about as awful as would be expected. Headcount is down pretty much across the board, with the total number of lawyers employed by the 250 largest firms back at 2005 levels, wiping out three years’ growth.
In our view, the data support what we’ve been saying all along: firms are grossly underreporting layoffs and stealth layoffs are running rampant.
After the jump, correlations and commentary.
Not too long ago we showed that relying on net changes in headcount is pointless when we broke down the turnover at Nixon Peabody. There, what appeared on the surface to be a net headcount reduction of 19 attorneys actually hid the fact that 32 associates had left and only five true lateral associates joined. The rest were acquisitions of foreign offices and hires of first years.
So when the NLJ shows that there are 5,259 fewer lawyers in the top 250 (down to 126,669 compared to 131,928 last year), keep in mind that that’s a net number. In fact, those firms had planned to bring on 6,636 new lawyers, but 2,784 were deferred. That means 3,852 of the net number could easily go over to the other side, or put another way, there are at least 9,111 fewer lawyers with any experience.
It’s also interesting how the numbers diverge from reported layoffs.
The firm losing the greatest number of attorneys was Latham & Watkins, which shed 444 lawyers. It had 1,878 attorneys this year, compared with 2,322 in 2008, for a 19.1 percent decline.
Yet the firm has only reported one layoff, 190 associates (and 250 staff) back in February. That was 12% of the associate headcount at the time, but now we see that total attorney headcount is down significantly more. We’re also to believe that a greater number of lawyers actually chose to leave the firm during the worst market in at least 15 years? Not to mention, that’s again a gross number, so it assumes that no one joined the firm to offset departures.
That’s now Exhibit A for the pervasiveness of stealth layoffs.
At least Latham reported layoffs.
In addition to Fried Frank [see below], firms with major headcount losses were Paul, Hastings, Janofsky & Walker; Dewey & LeBoeuf; Dechert; Milbank, Tweed, Hadley & McCloy; and Epstein Becker & Green.
Compare those to what’s been aggregated in the Layoff Tracker (don’t forget, you can search the raw data table by firm name).
Fried Frank has consistently been the subject of stealth-layoff rumors and during the reporting period (Oct 1, 2008 to Sep 30, 2009) announced layoffs of just 56 lawyers (plus 15 more were reported in stealth layoffs). But the firm is down 168 lawyers, or 26.4%. 112 people really found better opportunities?
Same goes for Paul Hastings, where the total reported number is a mere 44 lawyers. That’s just about the same number as Dewey, which has laid off a reported 46 lawyers, although 11 of those were from closing the Charlotte office. Milbank has become a running joke for its opacity, although the firm did confirm laying off 49 lawyers in May. Dechert can’t seem to figure out how many people to lay off, as the firm has had six separate rounds (only four of which are in the reporting period, though) totaling 107 lawyers, but at least they’re being relatively forthcoming. Epstein Becker has only admitted to laying off 23 lawyers.
So how do firms with so few layoffs have such significant reductions? Few people are departing voluntarily because there’s no place to go. And those that are aren’t going to the most-common subsequent employer: other large law firms. They’re also not going inhouse, because corporations started their hiring freezes long before firms started laying people off. Sure, there’s always work at the post office, but even government work can’t be picking up all the slack.
Firms have obviously been cutting far deeper than reported and those affected are falling out of the BigLaw picture entirely.