Career Development --> In a Down Market

2001: The Uncertainty Principle

What goes up must come down. For the past several years, the economy has been going up, but it looks as if we are in for a "correction". What does that mean for the legal job market? Since legal employment is directly affected by the economy at large, particularly with regard to corporate activity (see Hot Tip: BEAR OR BULL?), we may be in for a bit of a rough ride.

While the top firms continued to make huge leaps in size and profitability last year, the type of work being handled is changing. Over the past few years, dot-com's and other emerging growth companies fueled a growth binge, causing law firms to compete with their clients for lawyers to handle tremendous increases in corporate start-up and IPO work. However, during the last half of 2000, the number of IPO's dropped precipitously. However, law firm corporate practice continued to be extremely busy, catching up on backlog and handling a heavy mergers & acquisitions and financing workload. In addition, big-ticket litigation and intellectual property work continued unabated.

As we move into 2001, M&A work has declined and, if the economic slowdown continues, other corporate transactions may slow as well, thus, so will the demand for corporate/securities and tax attorneys. On the other hand, as in the early '90's, there may be an increase in loan workout, corporate reorganization, insolvency, and bankruptcy matters. Already, as many dot-com's are failing, lawyers in these areas of practice are seeing an upturn in their workload. Moreover, when there are layoffs, there is an increase in labor and employment work.

The huge number of dot-com's going out of business also is affecting the supply side of the legal job market. Many of the lawyers who so eagerly jumped from the traditional law firm to the start-up in search of riches in the form of huge stock options were disappointed when no IPO materialized or the company went out of business. Thusly chastened, many are seeking to return to their previous, or a different, law firm. While it was difficult to find attorneys to fill openings in the legal departments of mature corporations or corporations in traditional industries a year ago because they could not compete with the lure of quick riches, those positions are more attractive now.

Similarly, within the law firms themselves, many firms had set up investment funds (see Hot Tip: GETTING A PIECE OF THE ACTION) where they took stock in their start-up clients as partial payment or in lieu of fees, as a way of sweetening the pot and enticing their attorneys to stay on board. Some of those funds were wildly profitable, but some have performed disappointingly. Consequently, candidates in today's legal job market are much more interested in the base compensation, and are not so easily lured by the possibility of future rewards.

During the growth frenzy of the late '90's and early 2000, the large law firms developed a seemingly insatiable appetite for junior associates. As a result, they hired huge classes in 1998, 1999, and 2000. With the slowing economy, we are seeing more conservatism in the lateral hiring of junior associates. In the past few years, January brought a demand for attorneys entering their second and third years of practice to fill unmet needs or to replace associates who waited for their year-end bonuses and then moved to other positions. This year, so far, there have been fewer requests for 1998 and 1999 graduates than expected. It is unclear, at this point, how the demand for mid-to-senior level associates will be affected. Perhaps last year's huge salary increases and bonuses had the desired effect of enticing associates to stay put, resulting in fewer vacancies. In any event, we are not seeing the desperate need for more attorneys to keep up with increasing business.

However, it is early in the year and, with a new president, perhaps it is too soon to make predictions. But, some trends seem to be evident, and forewarned is forearmed. Therefore, take steps to re-tool your practice and expertise so that you become recession-proof. For example, if you are a securities or M&A specialist, learn corporate reorganization. Or, if you handle real estate financing, study loan workouts. And, for anyone contemplating trading a large law firm salary for the prospect of stock option riches-look carefully before you leap!

Career Development --> In a Down Market 2001: The Uncertainty Principle What goes up must come down. For the past several years, the economy has been going up, but it looks as if we are in for a "correction". What does that mean for the legal job market? Since legal employment is directly affected by the economy at large, particularly with regard to corporate activity (see Hot Tip: BEAR OR BULL?), we may be in for a bit of a rough ride. While the top firms continued to make huge leaps in size and profitability last year, the type of work being handled is changing. Over the past few years, dot-com's and other emerging growth companies fueled a growth binge, causing law firms to compete with their clients for lawyers to handle tremendous increases in corporate start-up and IPO work. However, during the last half of 2000, the number of IPO's dropped precipitously. However, law firm corporate practice continued to be extremely busy, catching up on backlog and handling a heavy mergers & acquisitions and financing workload. In addition, big-ticket litigation and intellectual property work continued unabated. As we move into 2001, M&A work has declined and, if the economic slowdown continues, other corporate transactions may slow as well, thus, so will the demand for corporate/securities and tax attorneys. On the other hand, as in the early '90's, there may be an increase in loan workout, corporate reorganization, insolvency, and bankruptcy matters. Already, as many dot-com's are failing, lawyers in these areas of practice are seeing an upturn in their workload. Moreover, when there are layoffs, there is an increase in labor and employment work. The huge number of dot-com's going out of business also is affecting the supply side of the legal job market. Many of the lawyers who so eagerly jumped from the traditional law firm to the start-up in search of riches in the form of huge stock options were disappointed when no IPO materialized or the company went out of business. Thusly chastened, many are seeking to return to their previous, or a different, law firm. While it was difficult to find attorneys to fill openings in the legal departments of mature corporations or corporations in traditional industries a year ago because they could not compete with the lure of quick riches, those positions are more attractive now. Similarly, within the law firms themselves, many firms had set up investment funds (see Hot Tip: GETTING A PIECE OF THE ACTION) where they took stock in their start-up clients as partial payment or in lieu of fees, as a way of sweetening the pot and enticing their attorneys to stay on board. Some of those funds were wildly profitable, but some have performed disappointingly. Consequently, candidates in today's legal job market are much more interested in the base compensation, and are not so easily lured by the possibility of future rewards. During the growth frenzy of the late '90's and early 2000, the large law firms developed a seemingly insatiable appetite for junior associates. As a result, they hired huge classes in 1998, 1999, and 2000. With the slowing economy, we are seeing more conservatism in the lateral hiring of junior associates. In the past few years, January brought a demand for attorneys entering their second and third years of practice to fill unmet needs or to replace associates who waited for their year-end bonuses and then moved to other positions. This year, so far, there have been fewer requests for 1998 and 1999 graduates than expected. It is unclear, at this point, how the demand for mid-to-senior level associates will be affected. Perhaps last year's huge salary increases and bonuses had the desired effect of enticing associates to stay put, resulting in fewer vacancies. In any event, we are not seeing the desperate need for more attorneys to keep up with increasing business. However, it is early in the year and, with a new president, perhaps it is too soon to make predictions. But, some trends seem to be evident, and forewarned is forearmed. Therefore, take steps to re-tool your practice and expertise so that you become recession-proof. For example, if you are a securities or M&A specialist, learn corporate reorganization. Or, if you handle real estate financing, study loan workouts. And, for anyone contemplating trading a large law firm salary for the prospect of stock option riches-look carefully before you leap!	Hot Tips The Search Planning Your Search Assessing Your Marketability Resumes and Cover Letters Interviewing Strategies Special Circumstances Following Through Compensation Making the Transition Career Development Getting Ahead In a Down Market Making Partner Hot Practice Areas Law Firm Economics California Legal Market View our most recent Hot Tip - Same Desk, Different Job, posted 3/7/08 The California Bar Exam Listen to Your Recruiter Check out our new book, "The Right Moves: Job Search and Career Development Strategies for Lawyers"

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