This week, economists missed on the good side — initial jobless claims fell by more than expected. The 502,000 applicants are the fewest since January 3, and the four-month rolling average is at the lowest level since November 2008.
It’s tough to grasp half a million people filing for first-time benefits as good news, but these are troubled times, so we have to cheer where we can. Don’t get too excited, though. Even news that looks good at first glance probably isn’t. The 139,000 people who came off the continuing-claims roster more likely did so as a result of benefits running out or giving up the search than actually finding work.
But don’t be surprised if that number starts creeping back up. A bill was passed last week that will extend benefits by 14 weeks in all states, and six additional weeks in states where the unemployment rate is greater than 8.5%.
All in all, it was a relatively good week in BigLaw, with no layoffs reported. Nonetheless, firms continue to flail about trying to fix their economic models, and we document the efforts after the jump.
While it generally avoided referring to layoffs, the National Law Journal showed significant drops in headcount across the 250 largest US firms. NLJ reports 5,759 fewer lawyers this year compared to last, compared to 4,513 identified on the Law Shucks Layoff Tracker. At Law Shucks, we’re convinced that not only are the declines due to layoffs, but that the underreporting of layoffs is even worse than we expected.
While trimming back on layoffs (and congratulations to all those who made it through the first half of the month, which we’ve shown is far worse than the latter), firms turned to the old standbys of salary freezes, salary cuts, and deferrals.
On the salary freeze front, Covington went back to the well just in time for winter, freezing everyone except New York, despite optimism back in April when the firm proudly announced it was bucking the trend and giving normal raises.
Reed Smith announced its CareeRS™ program, with which Law Shucks isn’t too impressed, two weeks ago. New associates are taking pretty serious paycuts: California, Chicago, New York, and Washington, D.C., from $160,000 to $130,000; Philadelphia from $145,000 to $117,500; and Pittsburgh from $135,000 to $110,000. At least the firm has coupled that with a 20% cut in the billing rates, which was one of our biggest gripes about the program. Oh, and the firm also asked nonequity partners to kick in capital contributions (although they still won’t become true partners). The firm’s comments to Am Law Daily are spectacularly confusing:
“It’s about not just saying you’re a partner, but actually being one,” Jordan says. “It means something. It revolves around risk-sharing in the business.”
Sounds like partnership, right? Not so fast:
Under the plan, nonequity partners will actually have three choices: pay the required percentage into the firm and become what Jordan calls “fixed-share partners”; decline the option and lose partnership; shift into the fixed-share system more slowly over the next couple of years.
How do those statements reconcile? It’s risk-sharing, but only limited risk (and upside) sharing? We’re also curious to see just how much support the plan has, because it was never put to a formal vote, which would be expected for such a fundamental shift in the structure.
Jones Day just went ahead and did the simpler thing: it cut five partners in London from the equity and made them of counsel.
Much to our surprise, Freshfields is adopting a tiered approach similar to Reed Smith’s (which isn’t exactly the firm we at Law Shucks would be following right now, based on those comments about partners, but whatever), although compensation will remain the same for now, and the firm confirmed bonuses will be announced and paid as usual.
Would-be incoming associates at Katten Muchin must feel like they’re reaching in a bag, hoping someone else grabs the black marble. One third of the class had offers rescinded, one third got deferred out to next October, and one third starts in February.
North of the border, hiring for next summer is slightly up, although we haven’t heard as many tales of deferral from our Canadian brethren, so they might not have as big a backlog to clear out.
Another little glimmer of hope. Law Shucks is on record that bonuses definitely should be paid this year, and Sidley Austin is the latest firm to jump on the bandwagon, although no specifics have been provided yet.