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According to various reports, a recent survey from Wells Fargo’s Legal Specialty Group revealed some surprises. It’s been reported for the first six months of 2023, the legal headcount is up 3.9%, but billable hours are down. Significantly down. Wells Fargo surveyed over 130 law firms, including 68 AmLaw 100 firms. The Specialty Group frequently tracks and analyses law firm data and trends.
According to the Survey, lawyers in 2022 billed an average of 1,568 hours. This was 102 fewer hours than in 2021 and less than in 2020 and 2019. The reduction is about a 1.9% drop. But Wells Fargo also reports that in the largest 50 law firms, the decline was closer to 2.9%.
The result: not surprisingly, partners’ net income dropped 3.1% in 2022 after several years of growth. And more alarming, profit per partner fell 3.9%. This reduction is despite the fact overall revenue grew by over 4%. Obviously, many law firms were increasing their rates, some by as much as 7.7%, to make up the difference.
According to reports, the findings are consistent with a recent Thomson Reuters Study. That Study also reportedly found reduced demand and profits. It also noted expense increases.
The decline in billable hours could be due to several reasons, of course. One is that lawyers have become more efficient, using technology to get more done faster. Yeah, right. If you believe that, I have a bridge to sell to you.
Another option may be that firms and lawyers are catching their collective breath. Having just come off several years of back-breaking demand partly due to Covid, everyone has caught up and is taking a bit of a break. But lawyers don’t usually work that way.
Of course, the most obvious answer is that there is