Every marketplace operates according to the law of supply and demand, and the lawyer job market is no different. When the economy is strong, there’s plenty of legal work to go around, and law firm employers clamor to hire more lawyers to handle it. Conversely, when the economy slows and deals are down, hiring slows. If firms overhired during the good times, there are layoffs as employers “right size,” leaving lawyers scrambling for new jobs.
It seems there’s always either too few jobs for too many lawyers, or the other way around. Rarely, if ever, is there a perfect balance. That’s what keeps legal recruiters in business, as we work to pair scarce resources (either available lawyers or job openings) with desperately seeking candidates or clients—and make the best matches possible for the long run.
The balance of power in recruiting depends upon whether it’s a seller’s market with more job openings than qualified lawyers to fill them or a buyer’s market with more available candidates than job opportunities. Negotiation power resides with the side that has the scarcer resource and it plays out in the stringency of hiring criteria, practice area choice, flexibility of work schedule (including remote or hybrid options) and, of course, compensation packages including base salary and a variety of bonuses.
After the initial shock and hiring freeze caused by the pandemic shutdown in early 2020, legal demand and lawyer recruiting soared. Law firms were desperate to find bodies to do the work. Now, at the end of 2022, the deal flow is slowing and some firms find that they hired more lawyers than they need and are laying off excess staffing, most notably at tech-heavy law firms such as Cooley.
Junior associates who entered the market during the past two years haven’t seen this part of the hiring cycle, and are concerned about their futures. More seasoned lawyers understand that hiring levels are merely getting “back to normal” and echo rates seen immediately before Covid. If the economy continues to cool, however, the cycle may hearken back to the slow hiring times after the Dot Com Bust of the early 2000s or for several years during the Great Recession starting in 2009.
When legal demand is greater than the number of readily available lawyer candidates to handle it, top law firms may relax their traditionally stringent hiring criteria and look at graduates from outside the T14 law schools and/or go deeper into the class. They draft candidates with a wider variety of employment backgrounds and from other geographic locations, including outside the US, to fill the need. On the other hand, when the pendulum swings back towards slower hiring and employers have the power advantage, those stricter hiring criteria usually return.
Types of employers
During the sellers’ market of the past couple of years, candidates who, historically, worked at smaller, boutique, or regional employers became highly sought after by Biglaw. Many were lured away by the perception of higher prestige and the reality of fatter paychecks. Corporate legal departments and governmental entities also had a difficult time competing with the big firms for candidates, and many of their usually coveted openings were slower or hard to fill.
As the market slows, the power flows back in the other direction. Some of those recently hired Biglaw associates will be downsized. Others will look for the better work/life balance often available at the smaller firms or in-house, and gladly give up their big paychecks for a different career path. Some partners who aren’t producing as much client revenues as their Biglaw employers desire may make similar moves or look at virtual law firms as an attractive alternative.
Practice area choice
To hold onto their bargaining power, lawyer candidates must keep an eye on which practices are in greatest demand. “Hot” practice areas follow the market. In a booming economy, there’s easy money and lively corporate and real estate deal-making, so lawyers are funneled into those, and allied, practices. Thus, all types of transactional lawyers were in high demand over the past couple of years. As the market cools, many lawyers will need to retool—possibly even involuntarily.
As technologies develop, or regulations change, opportunities emerge. One example is the growth of cannabis practice groups in law firms as the industry becomes legal in an increasing number of states. “Evergreen” practices, such as employment and healthcare and some areas of litigation, usually hold their own but vary in emphasis depending upon what’s happening in the marketplace.
Remote and hybrid work schedules were a necessity during Covid shut-downs but became less so as pandemic-induced fears abated. Nevertheless, during the recent hiring frenzy, lawyers could all but demand work from home accommodation and employers acquiesced. Although it’s probably impossible to put that genie back in the bottle, as the balance of power swings towards employers, there’s more pressure for attorneys to return to the office. While the outcome of the in-office vs. remote/hybrid schedule debate is uncertain, some employers hint that job security and bonuses may be tied to in-office attendance.
In a seller’s market with candidates in high demand but in short supply, compensation packages skyrocketed. Base compensation increased dramatically; candidates with sought-after practice experience were offered shockingly high signing bonuses; and, to keep associates on the job and working hard, they also were offered sometimes unprecedented annual/year end, special, summer, and hours-based bonuses.
As hiring returns to pre-pandemic levels, those signing bonuses have all but disappeared. Summer and special bonuses were rare this year, and 2022 year-end bonuses look as if they won’t be much larger than last year’s (although those were very generous). Going forward, expect to see annual bonuses reflect the changing state of the legal economy. Hours bonuses, however, will remain important regardless, as a way to encourage those associates who are not downsized to keep up their billing efforts.
The legal job market is in constant flux and the balance of negotiation power between the candidate and the employer continues to swing from one side to the other along with it. The last couple of years were a wild ride and we’re in the midst of another swing. Hang on!