Published in Business NH Magazine
By: Richard A. Samuels
Professional services represent the fifth largest employment sector in New Hampshire, supporting over 30,000 jobs and paying among the highest average wages in the state. The Bureau of Labor Statistics projects that nationally the growth ìn legal services and employment of lawyers over the next several years to continue at approximately the same pace as the projected growth rate for all occupations. However, the New Hampshire outlook for growth in the legal profession is less positive, the long-term growth rate projected to be one-half of the projected overall growth rate in employment.
ln New Hampshire, professional and business services employment remained fairly steady during 2014, statewide. However, employment in the sector increased in 2014 in the more populous, south-central and southeast areas of the state, which we believe will continue in 2015. Competition for law firm jobs, both nationally and in New Hampshire is expected to remain strong, despite the significant reduction in law school class size and number of graduates at many law schools over the past few years, which occurred in direct response to what had become an overly competitive job market leaving a high percentage of new law school graduates without jobs.
While private law firms will continue to be the largest employers of lawyers, nationwide, many larger corporations have been and will continue increasing the size of in-house legal departments, primarily to control costs. Government employment of lawyers, which in New Hampshire is prìmarily by the Attorney General’s office, state agencies, county attorney offices, and the largest citìes, will continue, but is likely to be constrained by budgetary pressures.
Demand for legal services is significantly affected by cyclical swings in the economy. Economic downturns and recoveries will generally impact larger, full service firms with some consistency. Smaller law firms may be more or less affected by recessions and recoveries, as a factor of the particular types of legal services provided, industries served, and the fortunes of individual clients. With the continued, long-term recovery from the 2008 recession, demand for legal services generally rebounded. However, that rebound has not affected practice areas evenly, and that unevenness is expected by law firm leaders to continue in 2015. Specifically, corporate and business, labor and employment, real estate, and tax practice demand has increased, while litigation has declined slightly and bankruptcy practice has declined significantly in mid-sized law fìrms.
Growth in non-lawyer employment in the legal services sector will likely outpace additional lawyer employment, as more tasks are handled by paraprofessionals and legal assistants in response to continued pricing pressures. The New Hampshire Department of Labor projects a 10-year growth rate for lawyers at less than 5% in contrast to an 11% growth rate for paralegals and legal assistants and, reflective of the decline in litigation, a 33% increase in the number of arbitrators and mediators.
A recent national survey of law firms revealed that law firm leaders believe that price competition, practice efficiency, competition from non-traditional service providers, commoditization of legal work, and client demands for alternatives to hourly billing are significant and permanent changes that will continue to impact the profession. Nationally and locally, smaller annual billing rate increases than in the past, greater selectivity in promotion of attorneys to firm ownership, and increased use of part time and contract attorneys is expected to continue. However, these factors are expected to be more significant for larger firms than smaller firms. ln addition, unlike large firms located in major cities with high occupancy costs and compensation levels, New Hampshire firms will be adding jobs in New Hampshire and are not outsourcing lawyer and non-lawyer jobs to lower cost areas of the U S and abroad.
The market for legal services has changed since the 2008 recession in ways that are very likely to continue in 2015 and for the foreseeable future. Increased client pressure on cost, speed, and effectiveness in the delivery of services will require increases in efficiency, continued investment in and more effective use of technology, and smaller pricing increases than occurred in the past. Well-managed general practice firms, regardless of size, will increase their focus on growing in select practice areas and constraining growth or reducing legal services in practìce areas that have become less profitable.
Richard Samuels is Managing Director and Director, Corporate Department of McLane, Graf Raulerson & Middleton Professional Association.