Q3 Demand Growth; Rate Charts by Practice
Law firms are expected to register profit growth at year-end 2024, as firms have successfully increased rates, headcount, and productivity ("getting more out of each lawyer"), according to Thomson Reuters Law Firm Financial Index which tracks and analyzes billing and financial data for 171 U.S.-based law firms, including 51 Am Law 100 firms, 55 Am Law Second Hundred firms, and 65 Midsize firms (Law Firm Financial Index Q3 2024 Executive Report “LFFI Report”, 11/11/24).
Driven by growth in both countercyclical practices and transactional practices, demand was up 3.6% in Q3 2024 over Q3 2023 across all law firm size segments (Midsize, Second Hundred, & AmLaw 100). In fact, Q3 demand growth was nearly as robust as growth in the post-pandemic boom; and Q3 demand growth appears to be more sustainable, since it was not heavily reliant on a booming transactional market.
Q3 also saw substantial growth in productivity, which measures hours per lawyer. 64% of firms tracked by the LFFI Report saw productivity growth in Q3. Impressively, productivity growth was not accomplished by most firms through downsizing or holding headcount constant. In fact, all law firm segments except for the AmLaw 50 grew headcount over the last 12 months, yet still registered productivity gains.
Citi's Law Firm Group noted similar growth in its recent report, analyzing the first 9 months of 2024, relative to the same period in 2023 ('Strength of the Market:' Big Law Revenue, Demand Continue to Climb, Andrew Maloney, 11/13/24, American Lawyer) (finding demand and productivity growth of 3.2% and 2.2% respectively and double-digit revenue growth (11.9%)).
Rate charts
MLA's 2024 Partner Compensation Survey released last month puts into stark relief how much rates have increased for both equity and non-equity partners in recent years (2024 Partner Compensation Survey, including responses from 1,718 partners in the AmLaw 100 and 200). Equity partners reported a 39% rate increase since the last survey in 2022, while non-equity partners reported a 31% rate increase. The average hourly rate reported in 2024 was 30% higher for equity partners than for non-equity partners ($1,218 vs. $935).
Rates increased across practice areas. While Corporate and Tax/ERISA partners reported the largest rate increases from 2022 to 2024 ($340), Real Estate partners reported the largest percentage increase (39%).
