Trends in the Lateral Attorney Hiring Market in 2023
Certain practice areas have maintained consistent hiring or experienced a modest increase as the economy hints at recovery entering the latter half of 2023.
General State of the Economy and Law Firm Financial Stability
Though foundational components of the U.S. economy, like steady GDP growth and historically low unemployment rates, show strength, depressed corporate activity levels are affecting the demand for legal services. The situation worsened due to law firms over-hiring in 2021, leading to decreased productivity, especially among junior associates. However, certain practice areas remain in demand, signifying an increase in deal activities in some corporate sectors, which, in turn, is boosting law firm requirements and attorney recruitment.
Law firms have seen a rise in demand over the past quarter, aligning with the broader economic recovery. A recent Q2 2023 report by the Thomson Reuters Law Firm Financial Index (LFFI) revealed a 1.5% demand increase for legal services. This was a significant jump from the 0.1% rise in Q1. The study also highlighted an impressive 5.9% surge in client-agreed rates, the most substantial in over a decade. Demand mostly catered to countercyclical areas like bankruptcy and employment and less economically sensitive fields like litigation and antitrust.
However, the path to economic recovery isn’t devoid of challenges. Law firms grapple with overcapacity and efficiency issues. A survey by Wells Fargo’s Legal Specialty Group indicated a 4.4% revenue growth for law firms in the first half of 2023 but pointed out struggles related to an oversupply of attorneys hired during 2021-2022. Additionally, according to a Decipher Investigative Intelligence report, lateral hiring in Q2 2023 dropped by 33% year-over-year. Interestingly, partner hiring dipped by just 4%, while associate hiring plummeted by 43%.
Busy Associate Hiring Practice Areas
Even with many law firms overstaffed, certain areas continue to recruit. These sectors range from those traditionally countercyclical to ones less influenced by economic shifts or aligned with recent economic enhancements.
Labor & Employment
This sector has remained active over the last two years, particularly in employment litigation and counseling. Companies, still navigating a backlog of L&E investigations from the pandemic era, coupled with a rise in class action suits against employers, means L&E associates are highly sought after.
Data Privacy and Cybersecurity
The increasing number of corporate data breaches and evolving regulations have created a demand spike for experts in data privacy and cybersecurity.
Aligning with the rise in U.S. corporate bankruptcies, restructuring has seen predictable growth. Yet, it hasn’t reached the spikes typically associated with significant economic downturns.
With courts clearing the backlog of patent litigations from the pandemic period, there’s a surge in hiring patent litigation associates.
Litigation, typically less affected by corporate activity slowdowns, has seen consistent demand, especially in areas like consumer protection and public nuisance state attorney general actions.
Corporate and Transactional Practice Areas Experiencing a Rebound
Despite the setbacks in the past year, corporate transactional sectors are witnessing a revival in hiring. Recent data on M&A activity showcases this trend. As more economists predict an upbeat trajectory for the upcoming quarters and with recent firm hiring patterns, optimism surrounds the prospective increase in associate recruitment as we move through 2023 and into 2024.
If you’re seeking insights into the lateral attorney hiring market or considering a move in this dynamic environment, don’t navigate these waters alone. Contact our Managing Director in the Chicago office, Jesse Hyde, for expert guidance and dedicated support. The Lateral Link team is here to assist you every step of the way, ensuring you have the resources and opportunities tailored to your professional aspirations.