The grave recession that pundits warned about never really materialized. Whether that’s a factor of the Federal Reserve’s aggressive belt-tightening or a systematic misread of transitory inflation or a little of both, only the most cynical observers still see economic gloom. Even Larry Kudlow, the wrongest economist of all time, is admitting that his economic pessimism was all wrong. Some law firms are still going to lay people off, but it’s becoming near impossible to blame that on the economy.
The Thomson Reuters Q4 2023 Law Firm Financial Index report is out and, unsurprisingly, law firms are doing great. Yay.
But that doesn’t mean there aren’t some hangover effects from the little-recession-that-never-did.
The last quarter of 2023 saw law firms experience positive movement across all fronts — from legal demand and billing rates to productivity and expenses. This holistic improvement suggests a robust response to the challenges and opportunities presented by the current economic landscape. Particularly, large law firms continue to benefit from counter-cyclical demand, indicating a resilience that, while not eclipsing the highs of 2021, has managed to steady firms despite stagnant transactional demand.
So even though the economy never fell off a cliff, counter-cyclical practices continue to drive firms across segments:
One would expect the transactional work to pick up as the Fed gets less hawkish about interest rates. But since the economy never really had the ballyhooed collapse, why is counter-cyclical demand enjoying this little boom?
It might be more fair to say that the counter-cyclical units remained steady while everyone else freaked out.
So, for now, embrace the litigators in your lives. They kept this ship afloat last year while everyone else made the mistake of trusting Kudlow.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.