Compared to the best year for law firms in a decade, 2019 is still shaping up to be a strong year for the legal industry, according to Wells Fargo.

Based on midyear results for 132 national and regional firms, Wells Fargo Private Bank's Legal Specialty Group found revenue growth down slightly from this time in 2018.

Last year became the best year for law firms since the Great Recession, and although this year's numbers have been comparatively tempered, Wells Fargo said Monday that firms are still overwhelmingly optimistic about growing through the remainder of the year.

"It does look like the year will be a good year, as compared to a great year last year," said Joe Mendola, senior director of sales at Wells Fargo Private Bank's Legal Specialty Group. He said that while many growth indicators are down compared to the same period in 2018, the numbers were still "healthy."

"What we did see was revenue growth come in at 5.3% for all firms participating—not a bad number by any stretch of the imagination," he said.

Mendola also pointed to the 8.2% bump in inventory going into the third quarter, compared to the midpoint of last year, which he said should help boost revenue for the second half of the year. Revenue per lawyer, though down from last year, still had a respectable growth rate of 4.3%, down from 5% the previous year.

While deal activity is down compared to the midpoint of 2018, Mendola said the value of deals is up, suggesting that larger transactional deals are getting done mainly by the top 25 or so Am Law 100 performers. The decreasing volume, he said, could be a sign of decreasing mid-market transactional business, which is affecting the second half of the Am Law 100, he said.

"The economy is impacting the transactional business," he said, noting that in addition to 2019 numbers being compared to a record-breaking 2018, uncertainty in the face of a potential recession could serve as a weight on the legal industry.

One concern Mendola cited was expense growth relative to revenue growth: Average salary and general expenses for all firms in the study increased 7% and 6.5%, respectively, compared to 5% and 3.7% last year. On top of associate raises, this is partially due to "surprising" growth in attorney head count and law firm staff head count, he said.

The slowdown in growth, coupled with a growing attorney head count, means that productivity per lawyer has fallen in all size segments.

"The shrinking margin is a bit of a concern," he said.

Still, Mendola maintained that the takeaway from the study was a net positive. "When you look at the overall financial metrics, they're not bad," he said. "The metrics are all positive."

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