May 6, 2014
Peer Monitor Economic Index Rises in First Quarter
EAGAN, MINN. – The Peer Monitor Economic Index (PMI), which measures the relative health of the legal marketplace, rose 4 points to 56 in the first quarter, boosted by gains in demand and rates. Demand for law firm services was up 0.9 percent compared with the same quarter a year ago. Worked rates were up 3.4 percent. Productivity, however, slipped 0.2 percent.
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 in the first quarter, providing a positive start to the year following a weak 2013. Transactional practices were particularly strong in the first quarter. Corporate work was up 5.0 percent and has risen in three of the last four quarters. Real estate work was up 3.7 percent, its fourth consecutive quarterly gain as the housing market continues to strengthen. Tax work rose 6.7 percent.
Strength in transactional practices helped make up for continued weakness in litigation, which was down 1.0 percent. IP Litigation fell 1.1 percent. Litigation practices have now fallen for seven consecutive quarters.
Most major markets saw stronger demand. New York was up 5.7 percent. Los Angeles rose 4.4 percent. Chicago was three percent higher while Washington, D.C. gained 2.6 percent. San Francisco was up 0.4 percent.
Worked rate growth was 3.4 percent. Productivity dipped 0.2 percent despite the stronger demand growth. Even though headcount growth has been slowing over the past few years, firms continue to add capacity that exceeds demand.
Expenses ticked upwards. Direct expense growth rose to 2.2 percent. Overhead expenses grew 2.5 percent.
“2014 has started on a positive note,” said Mark Medice, senior director, Peer Monitor. “However, comparisons against a weak first quarter last year may make the picture slightly rosier that it appears. Nonetheless, by most measures, the market for law firms services showed improvement over last year, and we will continue to watch closely to see those trends continue as we move further into the year.”
For more information about the PMI and to review the latest PMI report, visit http://peermonitor.thomsonreuters.com.
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