The large law firm market continued showing signs of stabilization in the first quarter of 2021, hinting at an ongoing revitalization in the market as the major worries over the global pandemic slowly wanes.
Even though the Thomson Reuters Peer Monitor Economic Index (PMI) slipped by 7 points to 62 in the first quarter of this year, there were plenty of encouraging signs that the market is moving back towards pre-pandemic levels.
Last year’s first quarter set a high benchmark for comparison this year. Legal demand grew by 2.0% last year, making the slight contraction of overall demand of only 1.0% for Q1 2021 can be viewed somewhat positively. And demand for corporate work, especially M&A, headline the key practice growth areas for large law firms as they began 2021.
You can download a copy of the PMI report for Q1 of 2021 here.
On the supply side of the industry, lawyer staffing recovered to be nearly flat against that same pre-pandemic baseline, which was again another positive for the industry. Rate growth continued at a high pace, up 4.7% on average; however, this was a noticeable drop after three consecutive quarters in which average worked rate growth exceeded 5%.
While expense metrics remain at lows not seen in the last decade, this may be the last quarter where we see such large percentage reductions. As economic trends continue to recover, expense categories are likely to expand again. In addition, these figures are reported on a year-over-year basis, so the expense figures for the current second quarter will be compared to a Q2 2020 baseline, which of course is set understandably low.
“While some of the data remains mixed, most signs point to a large law market that is moving towards more normal levels of activity,” says Mike Abbott, vice president of Market Insights and Thought Leadership at Thomson Reuters. “Strategies employed over the last year, such as expanding flexible working arrangements, supporting higher rates, and reducing costs, have generally put firms in a good position as the trends show a continued recovery through the first quarter.”
The PMI, produced by Thomson Reuters, 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.