With bright spots in real estate, health care and regulatory work, Chicago's legal community reported a fairly strong first half of 2013 following years of slow recovery. But like most in the Midwest region, the real focus is on whether revenue growth will accelerate so that clients can boost their legal spends overall.
"Companies are beating [earnings] projections, but that's due largely to continued cost-cutting — and law firms live on the debit side of the balance sheet," said J.P. Helder, a legal recruiter at H3 Counsel LLC. "We might have to wait until the fourth quarter to see any real evidence of that."
From attorney Jeffrey Stone's perspective, the legal market is "not out of the woods." He said, "The economic recovery is continuing. We've had a strong first half, but it's not as robust as everyone would like it to be." Stone is a trial lawyer and chairman of McDermott Will & Emery's management committee. "People are still feeling vulnerable."
At Sidley Austin, incoming management committee chairman Larry Barden offered a similar scenario: "This is not an explosive economy, but it's improving." Major Chicago-area firms are responding to the phase-in of the Affordable Care Act with increasingly busy health care practices, and white-collar investigative work is growing to satisfy the Foreign Corrupt Practices Act and the Whistleblower Protection Enhancement Act.
As the business capital of the Midwest, state government figures show that more than 45,000 lawyers are licensed in Chicago's home, Cook County, with roughly half as members of the Chicago Bar Association. Among the nation's largest 350 law firms, 7,745 work in the city.
Gary D'Alessio of Chicago Legal Search Ltd. said the city's hiring environment remains relatively slow because there's no pressure to hire in more than a few areas — real estate being the most active. "After that, you're seeing labor and employment, trusts and estates, and patents and prosecution," he said.
Most firms hiring are bringing in experienced laterals in specific areas. "A portable book-of-business threshold today is $1 million on average, and big firms want $2 million to $3 million," D'Alessio said; two to three years ago, the threshold was about half that size.
This trend is forcing big-firm attorneys to consider moving to smaller, specialty firms or to in-house positions where rainmaking is no longer a factor, he said. "Every five lawyers I talk to, two to three of them want to be in-house. A lot of lawyers are just not trained to develop business, and they'd rather just satisfy their internal client."