The market for legal services produced impressive demand growth in this year’s third quarter, seeing a 2.4% jump in hours worked compared to the third quarter of 2018 and marking the highest quarterly demand growth since the Great Recession.
The Thomson Reuters Peer Monitor Economic Index (PMI) rose three points to 56 due in part to this demand boost, but also due to one of the more consistent themes of 2019 — high worked rate growth. (The PMI, produced by Thomson Reuters Peer Monitor, is a composite index of law firm market performance using real-time data to measure the relative health and stability of the large law market in the U.S. A PMI of 65 or greater indicates strong law firm market performance.)
You can download a copy of the Q3 2019 Peer Monitor Index report here.
In our previous analysis describing the remarkable demand among some practice areas, the focus was on how successful the top-performing practices have fared in recent memory. The results showed that six practice areas had quarterly demand growth that finished among the top six quarters over the past 31 quarters. Among those, five finished within the top three. Most of these practices haven’t seen jumps this large in nearly four years, except for litigation. (Which if you read the last article, is strongly trending upward over the past two years.)
While the numbers are impressive and the historical context is great, what does that mean for the market? To understand that, we must add in additional elements. In particular, worked rates — the multiplier for all those hard-earned hours worked — has been strong for all of 2019, sitting at a 3.8% increase year-to-date. While Q3 was slightly lower, it remained consistent at 3.7%. In fact, the first three quarters of 2019 would rank as top three rate-growth quarters since 2013.
Combining the analysis of demand and rates by practice area, we see strong performances across several key practice areas.
Antitrust is leading all practices with average worked rate growth at 5.8% in Q3, which has been consistent all of 2019 at 5.4% year-to-date and is coupled with strong demand as well. Of course, Antitrust represents just 1% of the total hours worked, so variability becomes a factor; nonetheless, it still impressive and worth monitoring in the future.
Labor & Employment saw its best quarter in our database’s history. Currently, the average worked rate growth for the practice sits at 3.3% year-to-date, and 3.4% in Q3. Of practices that hold more than 3% of the total hours worked, Labor & Employment ranks last in worked rate growth for Q3 and so far in 2019.
What is most perhaps most noticeable has been the surge in worked rates from the Litigation practice in Q3. Currently, Litigation is sitting at 3.8% year-to-date, and in Q3 that figure shot up to a 4.6% increase, ranking third overall among practices. What makes this even more impressive is the massive bulk of hours worked in the litigation field, with some 28% of total hours-worked tracked by Peer Monitor. When you combine the magnitude of total hours worked in Litigation practices, the demand growth seen here combined with the great increases charged per hour results is an increase in fees worked of almost $700 million from Q3 2018 to Q3 2019.
All these statistics sound phenomenal, which may leave some of you wondering: “How come the PMI is sitting at 56 then, when you state that strong standing is 65 or more?” For that answer, you need to read the 2019 Q3 Peer Monitor Index to find out how productivity and expenses fit into the equation.