Editor's note: This story has been modified since its original publication.
Law firm leaders feel the economy is stabilizing and could even improve over the next six months, a survey from Citi Private Bank says.
About two-thirds of 133 managing partners or chairmen surveyed said the economy is the same or better than six months ago, and 59 percent expect a stable or improving economy over the next six months.
However, many still expect layoffs in the near future due to rising expenses.
More than one in three managing partners expect to cut non-equity lawyers in the near future, and one in four anticipate their equity partnership will shrink, according to Citi Private Bank's Managing Partner Confidence Index, released Tuesday.
The survey (.pdf) taps the national leaders of each firm, the bulk of which are among the Am Law 100 and Second Hundred.
"It's been a brutal six months," the report says, "but ... there is a strong sense among law firm managing partners that the worst of the recession may finally be over."
Morrison & Foerster Chairman Keith Wetmore, who participated in the survey, said the results largely reflected his views.
"Conversations with clients have a lot more optimism than they had six months ago," Wetmore said. "Many businesses have a feeling that they are no longer staring into an abyss."
The survey uses a 200-point scale, with 100 points being a "neutral" feeling, and 200 representing perfect optimism.
The overall confidence index rose to 91 points, up from 68 last quarter.
"I think that the outlook for our segment of the legal profession is stabilizing but that there will continue to be a lot of focus on how we price our services," Shane Byrne, managing partner of Baker & McKenzie's San Francisco office, said in an e-mail. "I think that Bay Area clients (and their law firms) are at the forefront of efforts to move away from the billable hour and this will continue to be both a challenge and an opportunity for the profession."
In the San Francisco Bay Area, he said, practice areas that have seen an uptick include tax, employment, corporate compliance and global equity services.
"Our technology-sector clients have adjusted quickly to the new reality and appear to be looking at opportunities for growth," Byrne said.
According to the survey, confidence about the economy at large was nearly neutral, at 99 points. But that was up from 49 points last quarter. Confidence in the legal profession specifically was also slightly pessimistic, at 90 points, but that marked a big improvement from 53 points last quarter. Expectations about demand for legal services rose to 91 points, up from 83 last quarter.
However, profit and revenue growth expectations remained low, at 57 and 66 respectively.
And managing partners expect expenses to keep rising, causing confidence in that area to fall to a new low of 37 points.
"With weak anticipated demand, MPs are looking to reduce expense growth, primarily by cutting or freezing headcount, and this recession continues to be marked by record layoffs among law firms," the report says. "Currently 38 percent of MPs expect to make cuts in the associate pool over the next 12 months. Another 36 percent expect the number of associates to remain where it is and 26 percent anticipate adding to associate headcount."