EAGAN, Minn. — The U.S. large law firm market scored a rare triple win in the second quarter, with strong gains in demand, rate growth, and productivity, which pushed the Thomson Reuters Peer Monitor Index (PMI) to a seven-year high.
The PMI, which measures the relative health of the U.S. large law firm market, surged 10 points to 62, its highest reading since 2011. Further, demand for law firm services rose 1.4% in Q2 – the strongest quarter for large firms in six years.
The Am Law 100 — the segment of the market made up of the largest law firms –– had an especially strong quarter, with demand for that segment growing by an average of 3.2%. Am Law Second Hundred firms, however, saw average demand decline slightly, falling 0.2%; and midsize law firms grew demand by an average of 1.8%.
Another departure from past quarters was seen in the litigation practice groups, which saw demand grown 2.2% in Q2, following several years of steady decline in demand. Indeed, litigation services saw demand grow, on average, across all segments of law firm size and is up 0.6% so far this year.
Download a free copy of the Q2 2018 PMI report here.
The positive trend was also seen impacting firms in other ways as worked rates grew by an average of 3.4% in Q2; and among Am Law 100 firms, average rates rose a hefty 4.2%. Rates for Am Law Second Hundred firms were up 2.9%, while Midsize rates rose 3.0%.
Productivity too, was impressive as it climbed for the second time in the last three quarters, gaining 0.9%. This growth helped partially offset years of productivity decline as law firms sought to bolster productivity recently through a combination of strong demand and slowing lawyer headcount growth. In the second quarter, headcount grew by an average of only 0.6%.
Mike Abbott, vice president of Client Relations and Global Thought Leadership at Thomson Reuters, noted the robust second quarter, but cautioned that “the market remains somewhat volatile, as this follows a surprisingly soft first quarter.” However, he called the overall results at the midpoint mark for the year “encouraging.”
“If favorable trends such as improved pricing power and restraint in headcount and expenses continue, the market could be poised for a strongly profitable 2018,” Abbott said.