Entry-Level Hiring at Law Firms Stabilizes — Lateral Hiring Increases

The market for entry-level associates at law firms has stabilized somewhat, according to the March 2005 edition of Patterns & Practices: Measures of Law Firm Hiring, Leverage & Billable Hours, an annual publication from NALP. Law firms decreased entry-level hiring by 8.4% from 2002 to 2003, but projected a decrease of just 1% from 2003 to 2004. Decreases occurred across all firm sizes between 2002 and 2003, but between 2003 and 2004 small firms of 100 or fewer lawyers expected to increase hiring modestly, by 2.2%, compared with small decreases at large firms. Employers had projected that their entry-level hiring would decrease by 8% between 2002 and 2003, close to the actual decline of 9.4%. Nationwide, about 84% of second year summer associates considered for an associate offer received an offer. This ranged from about 69% in firms of 100 or fewer lawyers to about 90% in firms of more than 500 lawyers.

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 about 1,100 law offices 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. Growth in hiring was strongest in the West/Rocky Mountain region, with a 6.8% increase expected in aggregate entry-level hiring. In contrast, entry-level hiring in the Northeast was expected to decline by 5.4%. All other regions expected changes of less than 2%.

  • Among the cities which collectively expected to hire at least 100 entry-level associates in 2004, changes from 2003 ranged from a decrease of about 8% in Boston and Dallas to an increase of almost 16% in the San Jose area. Hiring levels were close to steady in Chicago and Houston. Although some cities, e.g., Boston, New York, Philadelphia, and Washington, D.C., posted decreases in both periods, in others the change from 2003 to 2004 is very different from the change from 2002 to 2003. For example, the nearly 16% increase in San Jose followed a 27% decrease in the prior period. The increase of almost 11% in Atlanta followed a 15% decline.

  • Lateral hiring increased by almost 8% between 2002 and 2003, resulting in firms hiring in aggregate just about as many laterals as entry-level attorneys in 2003.

  • Lateral hiring was strongest in large firms, increasing by about 9% in firms of 251-500 lawyers and increasing by about 11% in firms of more than 500 lawyers. In contrast, lateral hiring decreased by 4% in small firms. Despite the decline in hiring at firms of 100 or fewer lawyers, these firms in aggregate still hire slightly more laterals than entry-level attorneys, with a ratio of 1.09 lateral hires for each entry-level hire. At the largest firms of more than 500 lawyers, the ratio is 0.75. Changes in lateral hiring ranged from -10% in Boston and New York, to over 50% in Philadelphia. Other cities posting gains of more than 10% include Atlanta, Chicago, Dallas, Detroit, Los Angeles, Newark, San Francisco, and San Jose.

Patterns & Practices documents other findings, including:

  • Nationwide, about 84% of second-year summer associates considered for an associate offer received an offer. This ranged from about 69% in firms of 100 or fewer lawyers to about 90% in firms of more than 500 lawyers. At the city level, in Austin, Portland, and Raleigh, about 60% of 2003 summer associates considered for an offer received an offer; in Minneapolis and New York City, over 90% of summer associates did so.

  • In 2004, firms on average employed slightly more associates than partners, for a ratio of 1.07. Large firms are typically more highly leveraged, with a ratio of 1.50. Smaller firms, in contrast, employ fewer associates than partners. On a city-by-city basis, these figures ranged from 0.53 in Detroit to just over 2.0 in New York City.

  • Although billable hour requirements ranged from 1,356 to 2,160 hours per year in 2003, most offices reporting a minimum require either 1,800 or 1,900 hours (24% and 21% of offices, respectively). Contrary to its reputation, New York City firms do not necessarily set the highest minimums. Although 24% of New York offices required 2,000 billable hours, more firms in Chicago and Miami did so-38%, and 57%, respectively, and about as many in Houston and Los Angeles did so. In San Francisco and 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, two-thirds of offices in Hartford set their billable hours requirement at 1,800 hours per year; as did about 40% in a number of other cities, including Boston, Wilmington, Portland, OR and Seattle.

  • With respect to actual billable hours worked, about 29% of offices reported an average of fewer than 1,800 hours per year, and 16% reported an average exceeding 1,950 hours per year. About 55% of firms of 251-500 lawyers reported that attorneys averaged more than 1,850 billable hours; for firms of 100 or fewer lawyers, the figure was 37%.

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, 2002-2004

# Hired in 2002 # Hired in 2003 # Expected to be hired in 2004 % Change 2002-2003 % Change 2003-2004 # Offices reporting
Entry-level associates 7,590 6,877 6,807 -9.4 -1.0 1,043
Second-year summer associates 9,427 8,638 8,918 -8.4 3.2 1,144

Lateral Hiring, 2002 and 2003

# Hired in 2002 # Hired in 2003 % Change 2002-2003 # of Laterals Hired for Each Entry-Level Associate Hired 2002 # of Laterals Hired for Each Entry-Level Associate Hired 2003 # Offices Reporting
6,907 7,438 7.7 0.82 0.97 1,217

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