November 03, 2014
Peer Monitor Economic Index Rebounds in Third Quarter
EAGAN, Minn. – The Peer Monitor Economic Index (PMI), which measures the relative health of the legal marketplace, rebounded slightly in the third quarter, rising two points to 57. Demand for large law firm services was up 1.2 percent – the third consecutive quarterly gain and the strongest jump since Q4 2012. Year-to-date demand is now up 0.9 percent.
Worked rates were up 3.1 percent – the same rate as seen in the second quarter. Despite the growth in demand, productivity was largely flat as firms continue to grow headcount. Growth in headcount reached its highest level in nearly two years, up 1.7 percent.
The 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.
Transactional practices continue to be among the leaders. Corporate work was up 3.2 percent for the quarter. Real estate work rose 2.8 percent and tax work managed a 0.6 percent gain. All three of the transactional practices have been up every quarter so far this year.
Litigation was down just 0.1 percent for the quarter – a modest improvement compared with its several recent quarters of decline. Litigation remains down 0.8 percent year-to-date.
Direct expenses continue to inch upwards as firms accelerate headcount growth. Direct expenses rose 2.9 percent in the third quarter – the highest rate in more than a year. Meanwhile, overhead expense growth continues to be stable, up 2.3 percent for the quarter.
“There were some encouraging signs in the law firm market in the third quarter,” said Mike Abbott, vice president, global client management and thought leadership, Thomson Reuters. “Most practice areas showed growth, and even litigation, which had been declining for quite some time, managed a nearly flat reading. But challenges remain, including tepid rate growth and the need to better balance capacity with demand. Taking into account the inevitable bumps and volatility in the market, the overall trend is starting to point in a more hopeful direction.”
For more information about the PMI and to review the latest PMI report, visit http://peermonitor.thomsonreuters.com.
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