Economic Indicators are Positive for Legal Profession

By Larry Bodine, Esq. of Glen Ellyn, IL. He is a business developer with 18 years experience who helps exclusively law firm attract and keep more clients. He can be reached at 630.942.0977 and www.ApolloBusinessDevelopment.com.

3% growth on the way

Several economic indicators for the legal profession show that the recession is ending and that a recovery is beginning. An industry forecast by First Research Inc. (a service of Hoover's Inc. online database) shows that growth in the legal sector stabilizes in 2009 and turns into 3% growth in 2010.  

The study cited several industry opportunities:

• Specialty Industries - Demand for legal services is expected to increase, due to the greater complexity of conducting business, particularly for global companies and in specialty industries related to science and technology. Rapid advances in fields like biotechnology and pharmaceuticals will result in more legal transactions and litigation. Analysts predict demand will increase for specialized areas of law, including intellectual property and technology law, that support these industries.

• More positive indicators: · Home prices increase. Home prices are beginning to rise in nearly all major cities. Prices are up 3.8 percent for June 2009 in San Francisco, 2.6 percent in Boston and up 4.2 percent in Cleveland. · Home sales soar 7.2 percent in July. The U.S. housing market is improving quicker than expected, with home resales in July posting the largest monthly increase in at least 10 years, as first-time buyers rushed to take advantage of a tax credit that expires this fall. · Sharp Rise in Consumer confidence. The New York-based Conference Board said Tuesday that its Consumer Confidence index rose to 54.1, from an upwardly revised 47.4 in July. Economists closely monitor confidence because consumer spending accounts for about 70 percent of United States economic activity. · Economic Indicators Up. The Conference Board index of leading economic indicators rose for a fourth straight month in July 2009. · Fed Views Recession as Near an End. On August 12, 2009, the Federal Reserve said that the recession is ending and that it would take a step back toward normal policy. · Unemployment rate does NOT increase.  Despite widespread predictions that the unemployment rate would crest over 10%, it essentially held steady at 9.4% as of August 7, according to the federal government. · Housing prices increase. Houses have finally become cheap enough to lure buyers. That, in turn, is stabilizing prices, generating hope that the real estate market is beginning to recover. For the first time since early 2007, a composite index of 20 major cities was virtually flat, instead of down. “We’ve found the bottom,” said Mark Fleming, chief economist for First American CoreLogic, a data firm. (Source: New York Times) · Stock Markets are Up. The Dow Jones Industrial has closed above 9,000 by the end of July, its highest point for 2009. The broader Standard & Poor's index is up 11% for the year. · Pent up consumer demand. The cash-for-clunkers program brought 120,000 new-car buyers into car dealerships from July 1 to early August. According to the New York Times, this reveals pent-up consumer demand, which is a sign of economic recovery.

  Expanded Business Advice - Clients in many industries ask law firms for strategic and business advice, in addition to counsel on legal matters. Business developments are often closely tied to legal issues, especially in financial and technology industries, so attorneys can become deeply knowledgeable in client operations. Prior experience or legal expertise in an industry gives a firm credibility and a competitive edge.

• Broader Array of Services - The largest law firms have grown by adding expertise across a number of areas of law-- such as corporate, tax, labor, environmental, and intellectual property--and in other legal specialties and some nonlegal services, such as lobbying. Changing political and economic circumstances lead to more demand for legal advice on current issues and topics, such as immigration law, securities law, corporate governance, healthcare, and pensions.

• Nontraditional Business Models - Law firms with new business models are attracting attorneys who want a different pace than traditional law groups offer. Usually these newer law firms pay attorneys only when they work, but do provide benefits between client assignments. These law firms can charge less, because they reduce overhead by not having to pay full-time salaries or bonuses, rent offices for attorneys who work at clients' sites or from home, or maintain high-priced partners.

• Non-Court Alternatives - Attorneys, courts, and clients are turning to alternative methods to resolve legal disputes. The use of mediation and other forms of Alternative Dispute Resolution (ADR) is growing, due to court backlogs and the time and expense required for a court resolution. These alternatives for resolving disputes use an independent mediator to determine a binding settlement, rather than go to court for a legal judgment.

• Online Records - Access to online court records can save attorneys and their staffs much research time. Law firms can take advantage of public access, without having to go to a courthouse to search paper records.

Layoffs slowing down

The torrent of law firm layoffs has slowed down to a stop according to Lawshucks.com.  As of August 7, 2009 -- 11,369 people working in law firms have been laid off this year (4,265 lawyers, 7,094 staff).  

Layoffs ramped up in January, February, and March, and then plummeted in the second quarter. The pace slowed (relatively speaking) in April and May, with more than 1,000 people laid off in each month. In June, layoffs slowed even further, likely the result of the arrival of summer associates and the run-up in the stock markets.

Recession’s end is near

Finally, the July 25, 2009 New York Times stated, “The American recession appears to be nearing an end.”

The index of leading indicators, which signals turning points in the economy, is rising at a rate that has accurately indicated the end of every recession since the index began to be compiled in 1959.

The index was reported this week to have risen for the third consecutive month in June, and to have risen at a 12.8 percent annual rate over those three months. Such a rise, pointed out Harm Bandholz, an economist with UniCredit Group, “has always marked the end of the contraction.”

Mr. Bandholz said he expected that the National Bureau of Economic Research, the official arbiter of American economic cycles, would eventually conclude that the recession will bottom out in August or September of this year.

If that proves to be accurate, the recession that began in December 2007 will have lasted 21 or 22 months, making it the longest downturn since the Great Depression.

“The current crisis won’t last forever,” said James W. Jones of Hildebrandt International at a conference in April 3, 2009, noting that:

• Present downturn in the legal market caused primarily by reduced demand, and demand will return in time.
• When the economic recovery finally begins, the legal market will be a leading indicator.
• While some restructuring will occur, the long-term prospects for the legal industry remain very good.
• Firms that take a long-term view and act in focused and strategic ways should be fine in the long run.