EAGAN, Minn. — With several key indicators of the health of the legal market gaining together for the first time in a while, the large law firm market had one of its strongest quarters in years. Indeed, the 4th quarter of 2017 saw demand, rate growth and productivity all gaining in the same quarter for the first time since Q3 2013.
The Thomson Reuters Peer Monitor Index (PMI), which measures the relative health of the U.S. large law firm market, rose to 60 — jumping a sharp 11 points — in one of the largest quarterly gains in the index in several years. (A PMI of 65 or greater indicates strong law firm market performance.)
In Q4 2017, demand for law firm services rose 1.0%, the biggest quarterly gain since Q1 2016. For all of 2017, however, demand shrank slightly, declining 0.2% — marking the second consecutive yearly decline in demand.
Rate growth reached a nearly four-year high, up 3.4% — the strongest growth since Q1 2014. For all of 2017, rates rose 3.1% — the best annual performance since 2014.
A surprisingly strong productivity number also provided some encouragement. While the gain was only 0.1%, it was the first positive quarter since 2013, reflecting both rising demand and restrained headcount growth.
For the first time in more than six years, all three of the largest practice areas — litigation, corporate and labor & employment — had a positive quarter for demand growth. Litigation saw its first quarterly demand growth since 2012, rising 0.8 % and breaking a string of 22 consecutive quarterly declines.
Transactional practices were mixed, as corporate and tax work rose, but real estate declined. Patent litigation, patent prosecution, and bankruptcy all fell slightly.
“The fourth quarter of 2017 was unquestionably positive for the law firm market,” said Mike Abbott, vice president of Client Relations and Global Thought Leadership for Thomson Reuters. “Firms are generally seeing improved pricing power and are achieving better balance between demand and supply.” Abbott added that 2018 will be an interesting year to watch the legal industry and see “whether these favorable trends continue, or the market reverts to the more moderate trends that have predominated in recent years.”
You can download a free copy of the Q4 2017 PMI report here