The second quarter’s Managing Partner Confidence Index is a good news/bad news situation. The good news is that the managing partners at the nation’s law firms are more confident than they were last quarter. The bad news is that managing partners overall are still expressing “negative” confidence — and that could lead to fresh layoffs in over the next six months. The Wall Street Journal Law Blog reports the good news:
The good news: the overall confidence index was up 23 points to 91. We’re still in “negative” territory, but only slightly. Summarizes Citi’s Mark Costiglio: “Managing partners are much less pessimistic about the broader economy and the legal market, and there’s a sense that the worst is behind them.”
And the bad news:
The not-so-goods: Expenses. MPs continue, it seems, to fret over expenses, especially lawyer compensation. And that, LBers, could lead to a continuation of the parade of horribles: layoffs, hiring-freezes, salary-cuts and the like.
After the jump, the Managing Partner Confidence Index executive summary points out the ugly news.
Just to make sure nobody gets too comfortable with this feeling that we’ve hit the bottom, check out this message from the second quarter executive summary:
With weak anticipated demand, MPs are looking to reduce expense growth, primarily by cutting or freezing headcount, and this recession continues to be marked by record layoffs among law firms. Additional measures include shelved summer associate programs, delayed start dates for first year associates, and programs paying associates to take time off to do pro bono work or pursue other interests. A few firms have even taken the unprecedented step of reducing associate pay, and we expect others could soon follow suit.
The indices for equity partners, associates and non-equity, non-associate lawyers all came in below the neutral baseline this quarter, indicating flat or declining headcount over the next 12 months. Overall, it appears that leverage will also be down over the upcoming year, with associate headcount levels trailing equity partner levels.
Despite all the cuts, managing partners feel that their remaining associates are still underutilized.
Despite the expected reductions in headcount, cuts may not completely make up for continued weak demand, and productivity, or billable hours per lawyer, will likely stay flat or decline slightly over the next 12 months.
Hey, it could be worse. It could still be March.
Managing Partners More Confident, But Layoffs Still on Horizon [WSJ Law Blog]
MPCI – Executive Summary: 2Q 2009 [Citi Private Bank Law Watch]