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The ABA Journal reports that the legal services sector gained 4,500 jobs in January, with total employment surpassing the previous 10-year high set in November, according to recent data by the U.S. Bureau of Labor Statistics. The legal industry, composed of attorneys, paralegals, legal secretaries and others, climbed to 1,160,700 jobs last month. That’s an increase of 16,000 jobs from January 2019, when the legal services sector had 1,144,700 jobs, the report noted.

Additionally, a recent report by Citi Private Bank’s Law Group reported that 2019 was a year of solid growth for the legal industry. The Citi results, based on a sample of 201 firms including members of the Am Law 200 and boutiques, showed thatBig Law net income grew significantly in 2019, driven in part by the strongest billing rate increases since 2008 and stagnation in the number of equity partners. Citi’s quarterly flash report found that over 2019, revenue growth outpaced the increase in expenses at Big Law firms, due in part to a 4.5% increase in billing rates.

Gretta Rusanow, writing for The American Lawyer, adds there were, however, two factors that dampened revenue growth in 2019: a slight drop in realization and a longer collection cycle. We saw continued consolidation and dispersion with the majority of firms (58%) reporting demand growth, but with 42% of firms seeing a demand decline during 2019, it remains a challenging environment for many firms, (as quoted in The American Lawyer).

“We believe that 2020 will be another year of growth, albeit more modest than 2019. Demand growth continued to gain momentum in the fourth quarter. Rate growth has been strong. Year-end inventory levels are high, providing a strong basis for first-quarter collections. While we are likely to see continued dispersion driving further market consolidation, we expect average industry revenue growth of 5-6% in 2020, with profits per equity partner growth in the mid-single digits,” Rusanow notes.

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer reports that the U.S. law firm industry had another strong year in 2019 and revenues for 2020 are predicted to continue growing at a healthy rate, according to a new report from Citi Private Bank’s Law Firm Group and Hildebrandt Consulting. The report found that after a slow start to the year, firms progressively improved their financial performance, and are expected to grow revenues between 5.5% and 6.5% over the course of the full year.

As in other post-recession years, the primary driver of revenue growth was an increase in billing rates, rather than demand growth, the report revealed. During the first nine months of 2019, billing rates had the highest growth rate since before the recession, growing by an average of 4.7 percent. By contrast, demand grew far less than in 2018 at a rate of 0.9 percent. The most significant impact on revenue growth was the continued trend of a lengthening of the collection cycle, which was largely driven by clients delaying payment of their bills, the report revealed.

The report also identified an active lateral recruiting market as a key trend in 2019, combined with a majority of firms hoping to grow the size of their equity partnership in the coming years.“The success rate of laterals has improved. In the past, half the laterals weren’t really accretive to the firm,” explains Brad Hildebrandt, Chairman of Hildebrandt Consulting. “But firms have become much more cautious about who they’re hiring.”

The key reason for the better success rate is even greater rigor on the lateral hiring process, Hildebrandt argues. Firms are aligning hiring with their overall strategy, improving their due diligence, and working harder to integrate new partner hires. “This eagerness to add talent at the top of the leverage pyramid will likely continue, with 61% of leaders surveyed saying they aim to add equity partners in the next two years,” Hildebrandt adds.

“Looking ahead, we expect that the most successful firms will continue to expand and innovate—despite ongoing geopolitical and macroeconomic uncertainty and volatility, and a challenging talent market. For those firms, expansion will be closely aligned to the firm’s business strategy—more so than pursuing opportunistic growth,” Gretta Rusanow, Head of Advisory Services at Citi Private Bank concluded. “For many firms, the steps they are taking to do more with existing clients and broaden their client base, focus on growth practices, industries and regions, and introduce further efficiencies in the way they deliver legal services will go a long way to ensuring that 2020 is a successful year.”

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer reports that law firm demand in 2018 was the highest on record since 2011, according to a recent report by Thomson Reuters. Further amplifying evidence that law firms, especially the largest, reached new financials highs in 2018. Another report, conducted by Citi Private Bank’s Law Firm Group, found that revenue growth was up 6.4 percent at the 191 firms surveyed by the bank. And in the last two weeks, Wells Fargo reported average law firm revenue growth at 5.9 percent and average net income growth at 7.6 percent, the strongest numbers since before the Great Recession.

Thompson Reuters report specifically revealed that law firm demand, billing rates and lawyer productivity all rose during the year. According to the analysis, demand, measured as the number of hours billed, rose 1 percent for the year among all firms. Among the Am Law 100 firms, that number was 2.8 percent. Am Law Second Hundred firms and midsize firms saw demand growth in 2018 of 0.4 percent and 0.2 percent, respectively. The Am Law 100 was the only segment of firms that saw demand growth in all four quarters of the year, the report found, (as quoted in The American Lawyer).

Fortunately for smaller firms, rate growth was more evenly distributed, the report notes. The Am Law 100 saw rates grow 3.8 percent in 2018, compared to 2.9 percent for firms in the Second Hundred and midsize categories. The report also notes that Am Law 100 firms were the only segment of firms to show positive full-year growth in productivity, which measures hours worked per lawyer. The 100 largest firms by revenue grew productivity in 2018 by 0.8 percent, while that figure was flat at Second Hundred and midsize firms, (as quoted in The American Lawyer).

Mike Abbott, a Thomson Reuters vice president for enterprise thought leadership and content strategy, said that while 2018 was a banner year for law firms— especially the nation’s largest—there remains uncertainty around 2019, especially after the fourth quarter was somewhat softer than earlier quarters. “Whether the tailwinds will continue in 2019 remains to be seen, as client rate pressure and a shifting competitive landscape for legal services continue to pose challenges,” Abbott said in a statement. “And while the entire market was improved in 2018, we saw an increasingly segmented market where the very largest firms gathered the lion’s share of the gains last year.”

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

The American Lawyer reports that law firm revenue growth in the first nine months of 2018 was the highest it’s been since 2007, and the outlook going forward remains positive. According to a new report, released by Citi Private Bank’s Law Group, overall revenue grew by 6.3 percent and demand was up 2.5 percent during the first nine months of 2018 compared to the same period in 2017. Many firms showed wider profit margins as a result of demand and billing rates grew at a level that outpaced an increase in expenses, the report revealed.

The Citi Private Bank’s report found that among the Am Law segments, size mattered, with Am Law 50 firms outperforming the other market segments in both lawyer rates and demand. Smaller, niche firms saw the greatest growth in revenue at 7.8 percent, and the second-greatest growth in demand at 2.5 percent. Looking at firms by geographic reach, the report revealed that global and international firms posted stronger revenue, demand and rate growth than national and regional firms, (as quoted in The American Lawyer).

“More than likely, this will be a year of strong top-line growth for the industry, but also characterized by expense pressure and continued dispersion among market segments,” notes Gretta Rusanow, research co-author and head of Citi Bank’s advisory services. “As firms end 2018 and look forward to 2019, it will be even more important to ensure that continued growth is profitable, particularly as this extended period of growth points to a looming downturn at some stage. Further, while our dispersion results show that some firms are enjoying even greater success than the average results of 2018 are showing, it also suggests that some firms are struggling mightily. We would expect this phenomenon to lead to further and perhaps accelerated consolidation ahead,” she adds.

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.