Mark Medice

The HILDEBRANDT BAKER ROBBINS Peer Monitor Economic Index (PMI)¹ scored 55 for the first quarter of 2010, which was flat compared to the fourth quarter of 2009, but well above the cyclical low point set a year ago in Q1 2009. In summary, cost cutting was unable to improve firm profitability in the face of continuing sluggish demand and ongoing client pushback on rates.

Demand² for legal services was flat compared with a year earlier, but would have been lower if not for seasonally strong growth in March. Despite the apparent stabilization, however, demand remains barely above the historic lows reached last year. Worked rates were higher than the same period in 2009, up 4.6 percent, but this largely reflected shifts in timekeeper mix as a result of firm deleveraging. Additionally, continued challenges in collections are making it difficult for most firms to grow effective collected rates. For practice groups, many transactional areas showed positive performance in the quarter – most notably M&A work, hinting at economic recovery. Litigation, however, remained neutral and somewhat lethargic.

While many of the PMI indicators continued to trend in a positive direction, top‐line growth remains elusive and firms are continuing to rely on aggressive cost controls and headcount reductions to preserve productivity and profitability. Consequently, industry recovery remains slow in the face of challenging market conditions. Pricing and other pressures continue to drive structural changes in the industry as firms explore new approaches to managing successfully in the current economic environment.

The Hildebrandt Baker Robbins Peer Monitor Economic Index (PMI) rose nine points to 55 for the fourth quarter of 2009. This is the third consecutive quarterly increase for the index, even though demand is light compared to historical levels, and pricing remains weak. For the full year, revenues for Peer Monitor participants fell slightly, down one percent. And profits per partner were flat for the year, due to aggressive cost controls and improved productivity.

The Hildebrandt Peer Monitor Economic Index (PMI) rose for the second consecutive quarter, up two points in the third quarter to a reading of 46. A PMI of 65 or greater indicates strong law firm market performance. Although demand and worked rate growth remain weak, there are increasing signs of demand stabilizing in key practice areas, such as litigation.

PMI 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.

SOMERSET, N.J., August 20, 2009 – Aggressive cost controls and headcount reductions are helping law firms deal with weak demand and rate growth. Despite continuing economic headwinds, firms are aggressively reducing their expenses, helping to maintain profitability. As a result, the Hildebrandt Peer Monitor Economic Index (PMI) rose four points in the second quarter to a reading of 44. A PMI of 65 or greater indicates strong law firm market performance. PMI 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.

Demand, as measured by billable hours, was down 7.3 percent in the second quarter compared with a year earlier. However, there are some signs that demand may be beginning to stabilize. Bankruptcy work continued to be strong. Litigation work was down from a year ago, but may be stabilizing. Transactional practice areas, including corporate, mergers and acquisitions, capital markets, and real estate were substantially lower but should show signs of recovery in the second half of the year if the general economy continues to improve.