This Week in Layoffs: 11.07.09

Ed. note: Above the Law has teamed up with Law Shucks, which has done excellent work translating all of the layoff news into user-friendly charts and graphs: the Layoff Tracker.

It was pretty hard to miss this week’s big news: unemployment crashed through the 10% barrier, hitting 10.2% in October – the highest level since 1983 (and, of course, worse than predicted). Underemployment also hit record levels, with the number of self-reported disenfranchised and under-utilized people reaching 17.5%.

Republicans jumped on the numbers as a sign that Obama’s package has failed, and the White House countered that it has saved almost 700,000 jobs. But that claim doesn’t even come close to addressing the original estimates and is completely unmeasurable. Still, the administration is reconsidering ideas it had previously rejected, like a highway bill and a business tax credit for new hires, even as they ask for two versions of a budget: one with flat spending and another with a 5% cut.

Law firms got their place in the MSM sun this week, as Bloomberg used a former law-firm employee as an example of increased migration to areas perceived as having jobs:

Some people are pulling up stakes and moving to where they think the job prospects may be brighter. Beth Rubin, 41, lost her position as a receptionist at the law firm Goldstein Bershad & Fried, PC in Southfield, Michigan, in October. The resident of Ferndale, a Detroit suburb, is now selling her furniture and moving to Georgia. “I’m looking to get a job in Georgia, and I don’t know about the job market there, but I can tell you Michigan is horrible,” Rubin said in a telephone interview.

Of course, anything has to be better than Detroit.

More on the highs and lows in the legal sector, after the jump.

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Of the 190,000 jobs lost in October, 5,800 were in the legal sector (seasonally adjusted). The Law Shucks analysis of law firm layoffs in October tracked eight firms laying off 221 people (61 lawyers, 160 staff). That was actually fewer than September.

November is already looking worse, though. Just one week in and four firms, Dickstein Shapiro, Day Pitney, Goodwin Procter, and Clifford Chance, have had layoffs reported.

The American Lawyer cautions that there is at least one more major obstacle looming: collections.

A difficult year is about to get harder. It’s the start of collection season for law firms, and the normal Christmas rush seems destined to run smack into fresh demands for deeper discounts. Adding a shiver of fear to those events are continuing rumors of coming partner bloodbaths. The glib talk revolves around two purported problems: some partners really have had little work all year, and some firms have done a poor job of keeping their members informed of just how far off budget the firm is. Dollops of pain seem likely to fall on many heads.

Layoffs have become just one tactic of many for firms. Deferrals remain another hot topic as firms fervently wish for their problems to be solved for them, if only they can procrastinate long enough. Winston & Strawn is one firm employing the head-in-the-sand method (combined with a de facto salary cut by giving a below-market stipend), as it announced it will further put off its incoming associates’ start dates. We had to laugh when we read that Shearman & Sterling preemptively announced the deferral stipend for the graduating class of 2010.

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And even when firms proclaim that they’re proactively going out and addressing the issue, execution falls short. Case in point: Morgan Lewis and its announced intention to move off lockstep. Eventually. Despite seeming to have a plan over the summer, the firm has since shelved any change in its compensation structure indefinitely. This, by the way, is another example of why large law firms should hire professional (non-lawyer) managers.

The other idea being tossed about, because it reduces cost without involving much unpleasant disruption (and is therefore palatable to lawyers) is salary rollbacks to 1998 levels. If we recall correctly, that would be a base of $97,000. We’re more certain that late 1999 was when Gunderson Dettmer set off the arms race with the bump to $125,000 for the class of 2000 (back when "class of" meant both the year in which the person graduated and started working) and $20,000 bonuses for first years. In any event, that number was pulled out of thin air by a consultant who works for law firms, so take it with a grain of salt.

Still, it wasn’t all bad.

Last week, we closed with optimism that there were good reasons for firms to pay bonuses this year, and we were right. On Monday, Cravath announced bonuses, and late on Friday, Cleary matched. Interestingly, there has been grousing from both sides: some claimed that bonuses were in poor taste this year; others that they were too meager.

We threw in our two cents with The Case for Bonuses, which fleshes out the points we touched on: they’re an important morale booster in this difficult year; and clients’ year-end results are going to be extremely good.

The final numbers for the week are available on Law Shucks.