WASHINGTON, D.C. – The Peer Monitor Economic Index (PMI), which measures the relative health of the legal marketplace, rose 2 points to 55 in the third quarter, its second consecutive quarterly gain. Demand for law firm services rose for the first time this year – demand was up 0.8% compared with the same quarter a year ago. Worked rates were up 3.2%, and productivity was up 0.4% – its first gain in more than two years.

PMI is produced by Thomson Reuters, and 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 was up slightly following a flat second quarter. Litigation, however, fell for the fifth consecutive quarter, dropping 1.7%. IP litigation also was down for the fifth consecutive quarter, falling 0.3%.

However, corporate work saw its second consecutive quarterly gain, rising 2.1%. Real estate work also was up for the second quarter in a row, rising 3.7% as the housing market continues to strengthen. IP patent work was up a strong 6.1%. Labor and employment rose 3.4%.

San Francisco showed the strongest growth among the major markets, rising 1.6%. New York, Chicago and Washington, D.C. were largely flat. Los Angeles was down 2.6%.

Worked rate growth was 3.2 percent, the same as the second quarter.

Expense growth continues to flatten, reflecting ongoing efforts by law firms to manage costs and operate more efficiently. Direct costs and overhead expenses were both up 2.1%. Attorney headcount growth continues to slow, rising only 0.4%, the lowest rate seen in more than two years as firms bring capacity more inline with demand.

“There was a modest, but welcome uptick in law firm activity in the third quarter,” said Mark Medice, program director of Peer Monitor. “However, significant challenges remain in place.  Demand is still down year-to-date. While the fourth quarter is typically one of the strongest periods of the year, it will be interesting to see whether the partial government shutdown in October impacts the positive momentum that we witnessed in the third quarter.”

For more information about the PMI and to review the latest PMI report, visit http://peermonitor.thomsonreuters.com.