Large Law Firm Market Stabilizes in First Quarter, Says Thomson Reuters Peer Monitor

MINNEAPOLIS-ST. PAUL, May 10, 2021 – The law firm market continued to stabilize in the first quarter as it emerges from the effects of the COVID-19 pandemic. While the Thomson Reuters Peer Monitor Economic Index (PMI)[1] slipped by seven points to 62, most indicators showed encouraging signs that the market is moving back towards pre-pandemic levels. While demand was slightly down, rate growth remained high and continued cost cutting bolstered profitability.

Demand was down by 1.0% compared with the first quarter of 2020. Based on the comparison against a strong quarter a year ago, the report concludes that the relatively small drop-off is a positive sign that the market continues the recovery it began in the third quarter of last year.

Driven by a surge in M&A activity, corporate work rose strongly in the first quarter. Litigation continues to lag but could potentially rebound in coming months if courts are able to address their backlog of cases.

Law firms continued to slash overhead expenses, with office-related costs dropping by a whopping 37%. Meanwhile, lawyer headcount stabilized, with a flat reading compared with the first quarter a year ago.    

“While some of the data remains mixed, most signs point to a large law market that is moving towards more normal levels of activity,” said Mike Abbott, vice president, Market Insights and Thought Leadership, Thomson Reuters. “Strategies employed over the last year − such as expanding flexible working arrangements, supporting higher rates and reducing costs − have generally put firms in a good position as the trends show a continued recovery through the first quarter.”

A copy of the Q1 2021 PMI report can be downloaded at https://legal.thomsonreuters.com/en/insights/reports/2021-q1-peer-monitor-index-pmi.

The PMI, produced by Thomson Reuters, is a composite index of law firm market performance using real-time data drawn from major law firms in the United States and key international markets.

For more information on Peer Monitor, visit http://legalsolutions.thomsonreuters.com/law-products/solutions/peer-monitor.

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[1] The PMI is a composite index score, representing the quarter-over-quarter change in drivers of law firm profitability, including rates, demand, productivity and expenses. Positive factors driving firm profitability will produce a higher score.