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Legal Service Sector Loses 1,100 Jobs in October: Opportunities For New Players Begin To Take Shape

The On the Record blog has an interesting post “Is economic downturn hurting Baltimore law firm?".  Legal Affairs Writer Caryn Tamber notes that several big firm collapses contributed to the high job loss within the sector.  She wonders whether or not smaller “mean and lean” firms in the Baltimore market will be insulated from the economic stress felt by big fat law firms in the big cities.

Some firms say it’s because the Baltimore market is insulated from some of the worst because few lawyers here practice the kind of finance law that’s suffered lately. Others say it’s because of good planning on their part. While New York firms grew bloated with high-priced associates during the boom, the smart Baltimoreans restrained themselves, stayed lean and are now in a better position, the story goes.

But stories like one from the New York Lawyer, forwarded by my colleague Brendan Kearney, really make me wonder how long Baltimore firms can dodge the impact of the lousy economy, if in fact they’re actually successfully dodging now. The link is subscriber-only, but here’s some:

The legal services sector shed 1,100 jobs in October as contraction in the general economy continued to hit law firm employment, according to figures released Friday by the U.S. Bureau of Labor Statistics.     Overall, jobs in the legal industry have shrunk 1.1 percent since October 2007, the report says, to 1.16 million employees.

Ms. Tamber wonders if the downturn has already hit the Baltimore market and, if and when it does, whether it will be the secretaries or lawyers to get the boot.  Interestingly, she wonders whether or not firms will even admit the economic stress they are under,  or will they insist they are just shedding dead weight?  One of the biggest dangers for any attorney or staff member working for a law firm is having to wonder whether or not you would even know that the firm was in big trouble well before the hatchet falls. 

The legal market sector is shrinking.  Large firms whose clients are under severe financial pressure will not see the revenue they enjoyed 12 to 24 months earlier.  While contract disputes may continue to arise, few companies will pursue their legal rights in court against companies they know are marginally viable.  They simply will not foot the substantial legal bills required on the hope and prayer that the justice system spits out a good result for them and the defendant remains collectible.

Would you sue General Motors right now and expect that you would get paid?  Will General Motors ask its outside counsel to delay payment for legal services as part of its effort to control cash flow and extend its life?  How many other companies are out there just like GM who are moving towards that line on the balance sheet when they will no longer be able to meet monthly expenses.  I would tell you to start updating your resume but there will not be anyone on the other side to hire you.  What I would tell you is that you should start developing a plan to make it on your own or in a small group of attorneys who can control enough clients to get a new operation up and running.  For your families sake, for goodness sake, have a “plan B”.  Make it easy to deploy and make sure you have enough money socked away to cover 30 to 90 days of startup.  If you are operating on a flat fee basis, you won’t need that much capital on reserve. 

Don’t wait until the layoffs start coming before you consider your alternatives.  If you cannot generate enough clients on your own to hang out a shingle, find an attorney who’s got a block of business and solid client relationships.  You might want to bring them a latte in the morning and comment on the photographs of their kids.  Things are going to get pretty interesting in the next year or two.  The legal market will be experiencing its first real opportunity for foundational change where new business models start competing directly with old and clients have real  choices amongst legal service models. 


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