How is the weakening economy impacting law firms?
The West Peer Monitor Index for Q2 2008 shows firms are booking fewer billable hours in 2008 compared to 2007, and are trying to adjust to softening market conditions by improving productivity and reducing expenses.
West Peer Monitor Index is a near real-time index that measures legal market conditions. The Index showed a slight rebound in the second quarter, although it’s not clear whether the law market has bottomed out, or this is just a temporary bounce as law firms continue to struggle against a weakening economy.
The West Peer Monitor Index shows that demand for law firms dropped by two percent in the second quarter vs. last year. Demand fell in most major markets, including New York, down 4.1%; London down 2.9%; Los Angeles down 2.9%; and Washington DC down 3.4%.
However, continued growth in rates and cuts in expenses are helping to offset falling demand, thereby sustaining profitability.
For rates, Regulatory practice areas are showing the strongest growth, along with Corporate and IP Litigation. Bankruptcy demand is up slightly while Labor & Employment is down and, not surprisingly, Real Estate is down sharply.
Firms are pulling back on both direct and indirect expenses under softening demand. Productivity improved slightly from the first quarter, suggesting a gradual balancing of headcount to hours.
2008 may be a year of transition as firms continue to moderate expenses in response to the lukewarm demand. West Peer Monitor Index will continue to track how the legal market is faring against the economic headwinds.
A full copy of the Q2 Peer Monitor Index can be found here. Also, listen to a Westcast podcast that discusses the details of the latest PMI results.
For more information, contact Mark Medice at (412) 203-2155 or email@example.com.
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