May 7, 2013
Peer Monitor Economic Index Falls in First Quarter
WASHINGTON, D.C – The Peer Monitor Economic Index (PMI), which measures the relative health of the legal marketplace, fell six points in the first quarter to a reading of 50. PMI is produced by the Hildebrandt Institute, part of Thomson Reuters.
PMI is a composite index of law firm market performance using real-time data drawn from major law firms in the United States and key international markets. A PMI of 65 or greater indicates strong law firm market performance.
Demand for law firm services weakened in the first quarter, although law firms saw some success in restraining costs.
Demand for law firm services fell 3.4 percent in the first quarter compared with the same time a year earlier. While the quarter had one fewer working day than a year ago, overall demand was soft and nearly all practice areas declined during the quarter. Demand for litigation work fell 3.7 percent during the quarter, its second consecutive quarterly decline. IP patent work was the only major practice area to show an increase in the first quarter, up 5.1 percent. Labor and employment fell 0.4 percent, and corporate work was down 4.4 percent. Real estate dropped 1.8 percent, tax work fell 5.9 percent and bankruptcy was down 9.0 percent.
Washington, D.C. was down only 2.7 percent, the best showing of any major market. Los Angeles fell 3.1 percent. New York and Chicago were both down 5 percent.
Worked rate growth was 3.1 percent, which was slightly below the rate growth seen for all of 2012.
The data indicates that firms are making more concerted efforts to try to control costs. For the first time in more than two years, the rate of growth slowed for both direct and overhead costs. Direct expenses rose 1.8 percent in the first quarter, continuing to slow from levels seen early last year. Overhead expenses were up 2,8 percent, the slowest rate since Q2 2011. However, costs are still not slowing fast enough to compensate for weakening demand.
“The first quarter turned in a fairly weak performance across the board,” said Mark Medice, program director of Peer Monitor. “Even some of the practices that had been relatively strong recently, such as transactional practices, have gotten off to a weak start in the first quarter. However, a more positive development is that firms are showing increasing success in controlling costs. Firms are focusing on improving efficiency, which is helping support profitability. In addition, it will leave firms well positioned to make significant gains if demand improves through the remainder of the year.”
For more information about the PMI and to review the latest PMI report, visit http://peermonitor.thomsonreuters.com.
The Hildebrandt Institute offers innovative programming, research and data that provide law firm leaders with business critical information, the latest trends, and cutting edge analysis of the most pressing issues and problems confronting the legal profession. Through legal leadership events and training programs offered in a variety of formats, in-depth research and analysis, and the dynamic legal benchmarking tool, Peer Monitor, Hildebrandt Institute kindles conversations about practical approaches for firms to achieve their strategic objectives and gives them the information they need to succeed. The Hildebrandt Institute is part of Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals.
Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial and risk, legal, tax and accounting, intellectual property and science and media markets, powered by the world's most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs approximately 60,000 people and operates in over 100 countries. For more information, go to www.thomsonreuters.com.