Entry-Level Hiring at Law Firms Declines — Lateral Hiring Also Off (3/12/04)

The market for entry-level associates at law firms has declined, according to the March 2004 edition of Patterns & Practices: Measures of Law Firm Hiring, Leverage & Billable Hours, an annual publication from NALP. Law firms decreased entry-level hiring by 6.8% from 2001 to 2002 and projected a decrease of 8% from 2002 to 2003. Decreases occurred across all firm sizes but to a much lesser extent in firms of 100 or fewer attorneys, where aggregate entry-level hiring declined by 2.6% from 2001 to 2002 and was expected to be nearly steady from 2002 to 2003, with a decline of only 0.6%. Employers had projected that their entry-level hiring would decrease by 2.2% between 2001 and 2002, but in fact it turned out to be down more than 6%.

Using information drawn from the two most recent editions of the NALP Directory of Legal Employers, Patterns & Practices provides expansive documentation of the hiring of entry-level associates, summer associates, and lateral attorneys at almost 1,100 law offices representing about 600 major law firms nationwide. NALP's unique access to such broad coverage over time makes Patterns & Practices the premier source for valuable perspectives on hiring at the national, state, regional, and city level.

Distinct regional differences in hiring are evident. Though still modest, growth in hiring was strongest in the Southeast region, with a 1.3% increase expected in entry-level hiring. All other regions expected decreases ranging from 6-10%.

  • Among the cities that collectively expected to hire at least 100 entry-level associates in 2003, changes from 2002 ranged from a decrease of 16% in San Jose to an increase of 10% in Dallas. Of these cities, only Dallas and Houston posted an increase. Hiring levels were steady in San Francisco. Many other cities posted decreases in both periods. In a few cities, the change from 2002 to 2003 is very different from the change from 2001 to 2002. For example, firms in San Francisco expected to hire the same number of entry-level associates in 2003 compared with 2002; from 2001 to 2002, hiring decreased 22%.

  • Lateral hiring was off dramatically (-25%) between 2001 and 2002, resulting in firms hiring in aggregate fewer laterals than entry-level attorneys in 2002, compared with hiring just about as many laterals as entry-level attorneys in 2001.

  • Lateral hiring decreased across all firm sizes, with a 32% decrease in the largest firms, compared with decreases of 18-21% in firms of fewer than 500 attorneys. On an aggregate basis, smaller firms hire more laterals compared to entry-level attorneys than do larger firms, with a ratio of just over 1 in firms of fewer than 250 attorneys, and a ratio of 0.56 in the largest firms. In all larger cities (again, those whose firms collectively hired more than 100 laterals in 2002, lateral hiring was down. In Dallas, lateral hiring was off by 50%, and was down by 30% or more in many other cities such as Atlanta, Houston, Minneapolis, San Francisco, and Washington, D.C.

Patterns & Practices documents other findings, including:

  • Nationwide, 85.8% of second-year summer associates considered for an associate offer received an offer. This ranged from about 79% in firms of 100 or fewer attorneys to about 91% in firms of more than 500 attorneys. At the city level, in Austin 63% of 2002 summer associates considered for an offer received an offer; in Columbus, New York City, Newark, and Tampa, well over 90% of summer associates did so.

  • In 2003, firms on average employed slightly more associates than partners, for a ratio of 1.12. Large firms are typically more highly leveraged, with a ratio of 1.58. Smaller firms, in contrast, employ fewer associates than partners. On a city-by-city basis, these figures ranged from 0.56 in Detroit to somewhat more than 2.0 in New York City and in the San Jose area.

  • Although billable hour requirements ranged from 1,336 to 2,160 hours per year in 2002, most offices reporting a minimum require either 1,900 or 1,800 hours (24% and 23% of offices, respectively). Contrary to its reputation, New York City firms do not necessarily set the highest minimums. Although 22% of New York offices required 2,000 billable hours, more firms in Chicago, Pittsburgh, and Miami did so-35%, 29%, and 62%, respectively - and just about as many offices in Houston and Los Angeles did so. In the San Jose area, most offices required either 1,900 or 1,950 hours; in Miami, most firms required either 1,900 or 2,000 hours. In contrast, more than half of the offices in Denver and Hartford set their billable hours requirement at 1,800 hours per year; in Portland, OR and Seattle about 40% did so.

  • With respect to actual billable hours worked, about 27% of offices reported an average of fewer than 1,800 hours per year, and about 18% reported an average exceeding 1,950 hours per year. About 51% of firms of 251+ attorneys reported that attorneys averaged more than 1,850 billable hours; for firms of 100 or fewer attorneys, the figure was 42%.

In addition to documenting nationwide and regional hiring trends, the 139-page report presents detailed information on entry-level and lateral hiring, leverage ratios, and billable hours for 38 cities and 7 states, including:

Cities - Atlanta, Austin, Baltimore, Boston, Charlotte, Chicago, Cincinnati, Cleveland, Columbus, Dallas, Denver, Detroit, Hartford, Houston, Kansas City, Los Angeles, Miami, Milwaukee, Minneapolis/St. Paul, Nashville, New York City, Newark, Northern Virginia, Orange County California, Philadelphia, Phoenix, Pittsburgh, Portland, Oregon, Raleigh/Durham, Richmond, San Diego, San Francisco, San Jose area, Seattle, Tampa/St. Petersburg, Washington, DC, and Wilmington.

States - California (outside of Los Angeles, Orange County, San Diego, San Francisco, and the San Jose area), Florida (outside of Miami and Tampa/St. Petersburg), Indiana, Michigan (outside of Detroit), New Jersey (outside of Newark), New York (outside of New York City), and Texas (outside of Austin, Dallas & Houston).

Hiring Trends, 2001-2003

  # Hired in 2001 # Hired in 2002 # Expected to be hired in 2003 % Change 2001-2003 % Change 2002-2003 # Offices reporting
Entry-level associates 8,254 7,690 7,071 -6.8 -8.0 1,071
Second-year summer associates 11,155 9,603 8,777 -13.9 -8.6 1,125

Lateral Hiring, 2001 and 2002

# Hired in 2001 # Hired in 2002 % Change 2001-2002 # of Laterals Hired for Each Entry-Level Associate Hired 2001 # of Laterals Hired for Each Entry-Level Associate Hired 2002 # Offices Reporting
8,937 6,715 -24.9 0.99 0.79 1,198

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