NALP Bulletin, December 2019

A 2018 study titled "Law Firms in Los Angeles After the Financial Crisis" from the Lowell Milliken Institute for Business and Policy at UCLA School of Law looked at Los Angeles offices of National Law Journal (NLJ) 250 law firms for the period 2007-2017. Among the findings of the report: although the Los Angeles market has been slowly recovering from the financial crisis of 2008, the total number of lawyers in 2017 remained smaller by about 5% from the 2008 peak. However, the report notes a distinction between "major Los Angeles firms," i.e., nine major firms that were founded in Los Angeles; offices of "non-local firms" that were in Los Angeles prior to 2007; and offices of "non-local firms'" that have opened in Los Angeles since 2007. The numbers in the first two groups have declined and are about 20% lower than their pre-recession highs, whereas numbers for the third group have increased, thus providing an offset.

The report also looked at home offices of major firms in five other markets: Atlanta, Chicago, New York, San Francisco and Silicon Valley, and Washington, DC, and found that 2017 lawyer headcount was down in all of them compared with 2007. The report also noted that, increasingly, firms are only "large" in terms of nationwide headcount, and not so much at specific locations. In Los Angeles, for example, the average office size was 70 in 2007, but had declined to 50 by 2017.

The report, however, posed and left open the question of what its findings mean for the entry-level employment market in Los Angeles. NALP's graduate employment data can help answer this question. Although we can't distinguish if a law firm job is taken at a home office of a major firm, at a long-established branch office, or at a newer outpost, we can track the number of law firm jobs taken in Los Angeles over the period, both overall and in firms of 251 or more lawyers, with the latter group serving as a proxy for NLJ 250 firms. We can also compare those numbers with those of the five other major markets that the UCLA study examined.

Figures for all six cities are presented in Tables 1 and 2 and depicted graphically in Figures 1 and 2. Note that in the text below the terms "large" or "largest" are used to refer to firms of 251 or more lawyers.

What do these numbers tell us? Key findings include:

• As of 2018, none of these cities had returned to their pre-recession or peak levels of hiring, either overall, or at large firms.
  
  
• New York City comes the closest, with 2018 hiring at large firms down by about 6% from its peak year, which in the case of New York occurred in 2009, rather than in 2008, which was the peak year in the other cities. Put another way, 2018 hiring at large firms in New York is at about 93% of its 2009 level.
  
  
• In Los Angeles, in contrast, entry-level hiring at large firms was down from its peak in 2008 by about 25% in both 2017 and 2018. That is, hiring in those years was at about 75% of the 2008 peak. The 25% figure tracks with the 20% decline at the "nine major firms" reported in the UCLA study.
  
  
• Each of these six cities started its recovery in 2012, but only at large firms in New York City did the numbers grow every year.
  
  
• In Los Angeles, after some increase in 2012, large firms have hired roughly 300 new associates since, with 2016 being an exception.
  
  
• Growth was erratic at the largest firms in other markets. For example, Washington, DC saw substantial growth in 2012, but then numbers essentially flat-lined through 2015. Likewise, numbers in the San Francisco and Silicon Valley area increased in 2012, but over the next four years did not see much net growth. A substantial uptick in 2017 was not sustained in 2018.
  
  
• Chicago and Washington, DC were the only markets other than New York to see an increase in large firm hiring in 2018 compared with 2017. Los Angeles was essentially flat, and numbers in Atlanta and the San Francisco and Silicon Valley area were down.
  
  
• A growth spurt at large firms in Atlanta in 2012 was not sustained, and large firm hiring has been below the 2012 level every year since, except in 2017. Thus, the number in 2018 was just 59% of the 2007 and 2008 levels.

In conclusion, we know that, nationwide, hiring by large firms in 2018 was down by about 17% compared with the peak year of 2008. Further, after little change in 2014 and 2015, numbers have come up each year since, and are up by about 13% over the 2015 figure. The numbers increased by just over 2% in 2018 compared with 2017. However, these overall figures obscure considerable variation across the six markets studied here. Only in New York City have the numbers come up every year, and large firms in Atlanta, and the San Francisco and Silicon Valley area, hired fewer new associates in 2018 compared with 2017. At large firms in Los Angeles, hiring was virtually flat in 2018 compared with 2017.

Table 1. Number of Law Firm Jobs Taken in Firms of 251 or More Lawyers in Selected Cities
Classes of 2007-2018

Note: Figures highlighted in yellow are the pre-recession high in each of these cities. Figures highlighted in green are the start of post-recession recovery in each of these cities.

Table 2. Total Number of Law Firm Jobs Taken in Selected Cities
Classes of 2007-2018

Note: Figures highlighted in yellow are the pre-recession high in each of these cities. Figures highlighted in green are the start of post-recession recovery in each of these cities.