Will Economic Downturn Affect Law Firms?

Last week, Above the law reported that east coast firms have started downsizing to deal with the lack of real estate and financing business in light of the country's economic woes.

Todat, the Wall Street Journal's Law Blog reports that the slowing economy is affecting litigation departments as well:

Legal consultancy Hildebrandt and Citi Private Bank are due to issue a report today, based in part on financial data furnished by 247 firms, indicating that the subprime mortgage crisis and fears of a recession have triggered not only a decline in corporate legal work but also litigation, a practice area that typically gathers steam in down
economies. “The current downturn has thus far been a ‘perfect storm’” for law firms, according to Hildebrandt and Citi.

Many firms will increase revenue and profits by only modest amounts in 2008, and “some firms will be down a lot in 2008, with decreases in income,” predicts consultant Brad Hildebrandt.

Few firms have so far resorted to layoffs or other drastic cost cutting, in part because many experienced healthy growth in 2007, consultants and lawyers say. But layoffs raise another concern: if attorneys are laid off en masse, firms may be caught flat footed when demand for their services picks up again.

But firms are likely to become more ruthless about “weeding out those attorneys who are not performing as well as they should,” says Mr. Hildebrandt. Firms may be particularly apt to prune at the partner level, even though partner firing were once rare, because partners are costlier and sometimes less productive than more junior lawyers, says Dan DiPietro, of Citi Private Bank.

Will Vegas see a similar pruning of lower billing associates? Has the economy affected the Vegas firms yet? Let me know if you're job is cutting back on perks or laying off associates: nevadalegal@gmail.com