Law360: Law Firms Slowed Pace Of Hiring In First Quarter Of 2024

Xiumei Dong | April 11, 2024, 4:33 PM

Despite a modest recovery in the latter half of last year, law firm lateral recruitment tapered off once again in the first quarter of 2024, with the hiring of associate candidates dropping the most during that period, according to Firm Prospects LLC.

Over the first three months of 2024, lateral hiring for attorneys across all tiers contracted by 12% quarter-over-quarter to 4,631 lateral hires, according to industry data provided by Firm Prospects to Law360 Pulse on Wednesday that tracks lateral moves among 3,500 firms.

The number also represents a 6% drop from the first quarter of 2023, when firms were scaling back their hiring efforts starting in the latter half of 2022 in response to economic uncertainty and a decrease in demand for work. Despite increased job listings, Adam Oliver, Firm Prospects' CEO and co-founder, suggested that law firms are still exercising caution in their hiring decisions, citing concerns related to issues like interest rates and deal flow.

"They don't have to move as quickly as they did in 2021," he said. "So even though we've seen an uptick in new job listings both in Q4 of 2023 and Q1 of 2024, we might not see those reflected in the lateral hiring numbers until Q2 or even Q3."

Across all attorney tiers, the hiring of associate attorneys continues to see the steepest decline, with a total of 2,173 associates hired in the first quarter, representing a drop of 33% from the previous quarter and a 10% decline from the same period a year ago, according Firm Prospects.

In contrast, partner lateral hires surged by 67% quarter-over-quarter, reaching 1,406 hires, while counsel lateral hires also increased by almost 4%, totaling 690 hires. However, despite the growth, counsel hires are still 3% lower than the same quarter last year. Partner hires have increased by 13% compared to last year

According to several legal recruiters who have spoken with Law360 Pulse, although many law firms have eased off on associate recruiting, there remains a strong "appetite" for partner hires as some firms leverage the current market downturn to strengthen their practices through strategic partner acquisitions.

"Firms are always interested in hiring people that have a solid reputation in the market, have a client following, and history of revenue generation," said Michelle Fivel, a founding partner of legal recruiting firm Hatch Henderson Fivel LLC. Despite challenges like reduced deal flow in transactional practices, she noted that firms continue to prioritize partners with a strong track record of revenue generation to maintain competitiveness in the future.

In the first quarter of 2024, law firms saw a slight 2% uptick in hiring for corporate practice attorneys compared to the previous quarter, according to Firm Prospects' data. However, despite this increase, hiring for corporate practices remained 2.5% lower than the same period last year.

Meanwhile, recruitment in litigation, which stands as the practice area with the highest number of lateral hires across the industry, declined by 24% compared to the previous quarter, and 1% compared to the same quarter last year.

Other high-demand practice areas like labor and employment, real estate and insurance also saw lateral hiring tick down compared to the previous quarter. However, hirings for intellectual property, banking, and trusts and estates saw a slight increase.

"Even with the slowdown in deal flow last year, firms didn't have as bad of a year as they thought that they would, so there's some extra money in the coffers to make these hires," said Stephanie Ruiter, a managing director at Macrae, a recruiting firm specializing in partner, group and senior government lawyer placements.

Ruiter also pointed out that many firms anticipate a rebound in deal flow, suggesting that this optimistic financial outlook, coupled with other positive market indicators, is fueling the increase in partner hiring across firms.

According to Firm Prospects' data, the Top 200 law firms were responsible for more than half of the partner hires in the first quarter, while the Top 50 firms alone accounted for nearly 20%. Among the Top 200 firms, partner hires also spiked by 54% compared to the previous quarter. However, across all tiers, these firms collectively made 33% fewer hires compared to the fourth quarter of last year, with associates experiencing the most significant decline at 38%, the data showed.

Echoing Ruiter, Tad Gruman, also a managing director at Macrae, suggested that firms are anticipating an increase in demand for partners in the transactional space, which is expected to become more aggressive as the year progresses.

"So firms that are positioning themselves now rather than [in] November to hire the top talent are going be the most successful," he added.

In terms of associate recruitment, Katherine Loanzon, a managing director at Kinney Recruiting, noted that firms are still assessing market conditions but are increasingly open to hiring.

"In the second quarter now, we do see firms being a little bit more optimistic," she added, although she does not anticipate hiring levels to reach those seen in previous years.

Read the original article here.