Checking In on Economic Indicators for the Legal Industry So Far in 2023
The Bureau of Labor Statistics has released its jobs report for September. The news was good for legal professionals, with over 4,000 jobs added for the month. The added jobs are a pleasant surprise after worries over lowered productivity among attorneys and a disappointing August, which saw the BLS report the lowest number of jobs for the year.
The legal sector had a total of 1,182,700 jobs in September. It's more than the same time last year, but just a bit down from the all-time high that occurred in June 2022. Most of those jobs are for attorneys performing legal services, but the legal industry jobs sector includes work by paralegals and other administrative staff.
All told legal sector jobs rose along with other industries to contribute to a positive jobs report for September that exceeded expectations.
Lowered Productivity Generated Worry
The jobs forecast for 2023 and beyond has been mixed. Total average billable hours lowered in 2022. Wells Fargo's Legal Specialty Group reported that headcount among big law firms was up in the first half of 2023, but productivity continued to be lower. A lot of the downturn in productivity could be attributed to a reduced demand for M&A work, according to Wells Fargo. It led to some concerns that 2023 would see a reduction in jobs.
Fortunately, that has not come to pass. At least, not to the extent initially feared. Law firms have been careful in hiring new associates. Despite this, lawyers employed full-time at big law firms increased by 3.9% in the first half of 2023. Average billable hours among associates at large law firms are on pace to hit 1,538, down from a few years ago. In 2021, associates averaged 1,688 billable hours.
There were several layoffs among big law firms over the summer, as well as deferred start dates for incoming associates, and there is some fear another round of layoffs is coming. But while large law firms may be feeling a bit bloated in terms of employment, the news is not all bad. The BLS still forecasts legal industry jobs to increase by 8% in the next 10 years, faster than most other industries.
Is Generative AI Already Influencing the Legal Labor Market?
A lot has been made of generative AI and its impact on the legal industry. Despite fears of AI taking jobs away, so far generative AI is being used to increase productivity. Generative AI has the potential to reduce research time, allowing smaller firms to take on more clients, and for mid-sized firms to compete with larger-resourced firms.
That's not to say that generative AI does not have the potential to affect billable hours, particularly lower-level legal work such as document review (the effect of this is already being seen). Generative AI may affect the pricing of legal services, with fixed rates for legal services potentially becoming more common, as just one example.
Financial Health of the Legal Industry
Until the full impact of how law firms use generative AI is seen, it is difficult to offer predictions on the future economic health of the legal industry. So far, it looks like fears of AI lawyers taking over are overblown. However, it is very likely that generative AI will reshape pricing and productivity for law firms in the near future. According to a Thomson Reuters Institute survey, the majority of law firms are still in the planning phase of how best to incorporate generative AI. Until then, lawyers can take comfort in the fact that the job market for attorneys has remained steady, and AI is still a tool better used to assist, rather than replace, attorneys.
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