Law Shucks, Layoffs

This Week in Layoffs: 12.05.09

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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.

Huzzah! Unemployment is down this week. OK, we’re not that excited. It’s not easy to get excited about the unemployment rate being "only" 10%. Week in and week out, economists are surprised by the rate – in good weeks they only under- or over- estimate, but all too often, they’ve been getting the entire direction wrong. Supposedly, this week’s good news even caught the administration off guard, causing President Obama’s speechwriters to scramble to breathe some sunshine into a recent speech.

One question his team definitely didn’t prepare him for was whether he’d consider legalizing prostitution, marijuana, and non-violent crimes to kickstart the economy. To the chagrin of some (many?), that’s not on the table. No word on whether he has considered gay marriage can save the economy.

After the jump, we recap what little information we’ve been able to extract from the firms this week.

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Unfortunately, the good news for the broader economy isn’t spreading to the legal sector yet.

The US economy lost 11,000 jobs in November, which was well below recent levels, but 2,900 of those were in the legal sector – and you can bet your bottom dollar that the legal sector isn’t employing 26.3% of the total workforce, even though it contributed that percentage of the total layoffs. To add insult to injury, as other sectors’ revised numbers from September and October were improving, still more legal jobs were being reported as lost.

But that doesn’t match up with the major firms’ layoff announcements, which have been dropping rapidly. As we showed in the montly recap for November, that was one of the best months all year, so we continue to believe stealth layoffs abound.

Layoffs were reported at only two firms this week: a stealth round at an AmLaw 100 firm and a round of integration cuts in the Russian operation of CMS.

Even quieter than the stealth rounds, though, is the silent stream of departing partners. LegalWeek reports that the UK Top 20 firms have lost 386 partners this year – 496 if you include people who remained with the firm but not in partnership roles. And contrary to the overall layoff trend, which spiked in the first quarter of this year, 313 of the 386 partner departures have come since May 1.

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While announced law-firm layoffs have slowed, the side effects are still being felt. It’s easy to forget that there are service providers downstream of law firms, and the shit keeps rolling down hill. Thomson Reuters is laying off 240 people in its legal businesses, which have been hurt by layoffs and costcutting at law firms. (HT: Slaw)

Orrick has jumped off the lockstep bandwagon, complete with pretty chart explaining the above-market opportunities for which its associates will be eligible. If you take it at face value, it’s good news for experienced associates who will have higher total compensation potential, but that money is coming out of the pocket of the newest attorneys, who will not be bonus eligible until they’ve "advanced to next salary level based on quality of contribution." At Law Shucks, we’re a bit leery of firms’ touting above-market caps. The fact of the matter is, firms have always paid out above-market bonuses to top contributors, no matter what the range on the published memorandum said. So now Orrick is going to use this to cap the real stars? That seems counterproductive and unlikely.

Patton Boggs has generally frozen salaries, but underutilized lawyers (approximately 10%) will be seeing salary cuts. The firm has also stretched the bonus range – a little lower on the low end, a little higher at the top.

Salary cuts have taken the lead as the cost-cutting measure of choice these days, and American Lawyer confirmed it: 40% of the AmLaw 200 have cut salaries and 44% are considering future cuts. 68% of those same respondents expect increased PPP in 2010, too. That would be a pretty significant turnaround, considering Wachovia Legal Specialty Group reported gross revenue down 6.9% and net income down 6.1% in a recent survey of 131 US firms (half of which were AmLaw 100).

No sooner has bonus season gotten into full swing (don’t forget the Law Shucks Bonus Tracker has all the information) than some have already turned their greedy little thoughts to salary thaws. Will salaries get back on track this year? How long until we start hearing the chorus of "NY to 190" again?

That’s not the only good-ish news this week: something we’ve been advocating for months is finally coming true. A handful of firms are going back to the well, doing additional on-campus interviewing for the 2010 summer program. For firms that (sensibly) cut back fall OCI, it’s perfectly reasonable to fill out the class if they believe things really will be picking up seven months from now. That’s consistent with the ABC News report of significant drops in fall OCI. (HT: ABA Journal) Of course, firms have shown that they tend to overreact both ways, so we’ll see how this works out in practice.

Above the Law is a repeat finalist in the ABA Blawg 100 (which it won going away last year) but if you want to vote for the little guy, consider a vote for Law Shucks – we’re up against ATL and a whole host of other big blogs, and the only new entrant in the News category. If we win, we promise we’ll come up with some sort of Venn diagram for the magazine profile.

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