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Legal Data & Metrics

Q3 PMI pulled back to reality by rising associate salaries

· 5 minute read

· 5 minute read

The Peer Monitor Index (PMI) has retreated from its highest level ever… to another record high

In the third quarter of 2021, the large law firm market’s conversation seemed to abruptly pivot. Subjects such as return to office and vaccination mandates took a sudden back seat to the war for talent — a conflict that flared from whispers of rising salaries to an all-out war of attrition by the end of September. The resulting salary rises have been so sharp and widespread that they’ve helped pulled down the Peer Monitor Index (PMI) score to 67, falling 17 points, in Q3.

The PMI, produced by Thomson Reuters, is a composite index of law firm market performance that represents the quarter-over-quarter change in drivers of law firm profitability, including rates, demand, productivity, and expenses. Positive factors driving firm profitability will produce a higher score.


Despite such a monumental drop, this new score is still higher than any that was achieved in the entirety of the 2010s. Legal demand has hit year-over-year high-water marks, rate increases have been solid, overhead expenses are under control, and productivity recorded the highest Q3 figures seen in three years. By nearly all major metrics, the third quarter of this year was reminiscent of the best of times for the industry, let alone those only a year removed from the depths of a global crisis.

But expenses have become the focus of the conversation and for good reason. Direct expenses saw an incredible jump of 7.2% year-over-year on a rolling 12-month basis. Some of this new growth is organic, with full-time equivalents (FTEs) increasing 2.3%; however, much of the jump comes from the much-discussed increasing salaries. This is obvious when examining expenses on a per lawyer basis, where direct expenses for the average firm grew by an eye-watering 8.0%.

The significant increase in salaries, while shading the otherwise bright performance of the market, should not eclipse it. Corporate work saw an 8.7% increase over Q3 2020 volumes, with the mergers and acquisitions (M&A) subset achieving 9.2% growth. Real estate’s advance also pushed into the double digits. Even when one parts the numerical fog — accounting for the low baselines of 2020 by using Q3 2019 instead — these areas have still undergone intense growth. When we make the comparison to 2019, corporate practice demand is up 6.2%, real estate grew 5.7%, and M&A nearly reached 5.0% growth in Q3 2021. This is no mean feat, as Q3 2019 was a strong quarter for all of these practices.

The PMI score was always destined to drop — the record-setting Q2 score was propped up by productivity figures which reflected temporary trends rather than long-run improvements. Yet this last quarter has been a litmus test for the large law firm market, a first glimpse at what may await the industry in a post-pandemic world.

You can download the full Thomson Reuters Peer Monitor Index Report for Q3 2021, which provides in-depth information on turnover, associate-specific compensation growth, and more, below:



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