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While there remains reason to be optimistic about the overall economic health of the legal industry, there are some areas of concern, according to the Thomson Reuters Peer Monitor Index (disclaimer: FindLaw is a part of Thomson Reuters). Overall, demand for legal services increased 0.7% for Q2, and billing rates rose significantly, with firms registering a 3.8% increase. This is offset, however, by an increase in direct expenses of 4.8% and an overhead cost increase of 3.4%. Demand did not meet the rapid pace of hiring, leading to lower overall productivity.
The Peer Monitor Index is a real-time composite of key performance data of select U.S. and international firms. The PMI rose to 53, up from 50 in Q1. A PMI of 65 or above is considered indicative of a strong market.
Am Law 100 is leading the market in all key areas, including demand, rate growth, and productivity. The Second Hundred also has reason to be optimistic, with strong growth in litigation in particular.
Midsize firms are faring less well. In Q2, litigation in midsize firms fell 2%, and is down nearly 3% for the year. According to the PMI, there may be a “sweet spot” for firms outside of the Am Law 1-50. Am Law 51-100 and the Second Hundred had the highest growth in litigation and is also closing the gap on billing rate growth.
Demand for litigation was particularly strong in 2018. It has since held steady in 2019, with a 0.1% increase. Transactional work has performed similarly, with a 0.4% increase. Corporate work, labor and employment and bankruptcy all had modest increases in demand, while patent litigation and patent prosecution both fell.
While Q2 results were mixed, nothing in the report is cause for alarm, according to the Thomson Reuters Legal Executive Institute. Mike Abbot, the vice president of Enterprise Thought Leadership and Content Strategy at Thomson Reuters, said firms must keep on eye on managing costs and lawyer headcount.
The Q2 report is an overall positive considering a weak opening quarter to 2019.
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