EAGAN, Minn.—The Peer Monitor Economic Index (PMI), which measures the relative health of the legal marketplace, was unchanged at 54 in the first quarter, the same as the previous quarter. (See Full Report.) Despite slightly higher demand, weak rate growth and falling productivity held back gains in the market
The PMI is produced by Thomson Reuters, and is a composite index of law firm market performance using real-time data drawn from major law firms in the United States and key international markets. A PMI of 65 or greater indicates strong law firm market performance.
Demand for large law firm services rose 0.6% during the quarter—the fifth consecutive quarterly gain.
Worked rates, however, rose only 2.8%—the lowest rate growth in more than four years. Productivity, meanwhile, fell for the sixth consecutive quarter, as firms continue to grow headcount faster than demand warrants.
Transactional practices remained strong. Corporate work rose 2.3%, while Real Estate was up 4.1%. Tax work inched down 0.4%, and Litigation, however, fell 0.3%—its 11th straight quarterly decline.
Direct expenses inched higher and were up 3.2% as firms grew headcount. Overhead expenses grew 2.6%.
“The first quarter highlighted both promising signs as well as some of the challenges that continue to face the law firm market,” said Mike Abbott, vice president, Client Management and Global Thought Leadership, Thomson Reuters. “Demand is extending the momentum shown in 2014, particularly among transactional practices. However, weakening rate growth is becoming a concern, and productivity levels continue to fall.”
“Firms are being continually challenged in this market environment to find ways to achieve meaningful growth in their profitability,” Abbot continued.
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