Just over five years after the start of the global financial crisis, the job of an Am Law 200 law firm leader arguably remains as tough as it has ever been. The painful decisions to cut staff and attorneys may now be a distant memory, at least for most firms, but there remain two distinct drags on Big Law businesses.

On the one hand, you have the still-sputtering domestic and global economies, prone to macroeconomic shocks like the U.S. government shutdown in October. And on the other, you have the ongoing shift in the way that clients purchase legal services, with more work pushed to cheaper suppliers, hoarded in-house, or fought over by a pack of U.S., international and global firms. In this market, merely treading water can be hard enough.

Against this backdrop, The American Lawyer’s 11th annual law firm leaders survey asked The Am Law 200′s ruling elite for their insight into current market conditions. We canvassed the heads of the U.S.’s highest-grossing firms for their views on the economic recovery, overall business sentiment at their firms, which practice areas were thriving and which were suffering, their plans for lateral hiring in 2014 and how their billing practices had changed. (The survey is conducted on a confidential basis; heads of 105 firms responded to it.) We also looked back to our 2009 survey to compare the results, and discovered some striking similarities between the two sets of data.

The overall impression is of a market where work flows remain depressed—although moving in the right direction—with some bright spots in litigation and regulation and signs of recovery in corporate work. Firms are being run on a far leaner basis than they were before the crisis, but most have hit their limits on cost control. “We’ve played this game as an industry for a number of years where we’ve gotten leaner and meaner, but there’s a limit on stripping out costs and lowering rates,” says Cooley CEO Joe Conroy.

Given the severity of the economic crisis, it is not surprising that growth in the U.S. economy remains sluggish. When asked how they felt the economic recovery would play out in 2014, 70 percent of this year’s respondents said that they thought it would remain the same, with 23 percent saying they expected it to speed up.

The survey period began at the end of August and continued through mid-October, so some pessimism could be attributable to the worsening political climate and eventual October government shutdown in Washington, D.C. Business conditions are “trending in a positive direction, but it continues to be a challenging environment,” says Akin Gump Strauss Hauer & Feld chair Kim Koopersmith. “The government shutdown doesn’t help, and there’s a sense that the U.S. doesn’t have its act together, which is a drag overall on the country and on the legal market’s ability to move forward.”

Still, two-thirds of our survey respondents said that they were “somewhat optimistic” with regard to their own firm’s growth in 2014, while just under a quarter said they were uncertain about their firm’s prospects. Those numbers match, almost exactly, the responses to the same question in 2009, at the nadir of the downturn, but are up just slightly from 2012, when 64 percent of respondents said they were “somewhat optimistic” and 21 percent said they were uncertain.

There’s also a sharp similarity when respondents were asked to characterize morale among their partners—56 percent described it as “somewhat optimistic,” compared with 54 percent in 2009. (However, in 2012, 63 percent of respondents said their partners were “somewhat optimistic.”)

Amid the gloom, however, litigation remains a bright spot. Just over 80 percent of respondents said they expected to make lateral partner hires in litigation in 2014. Given the ongoing crisis-related work in the banking sector and the tough regulatory environment in Washington, D.C., most respondents expect litigation’s strength to continue.

The next most popular practice for laterals in 2014 was corporate. Although M&A remains a tough market, there have been some bright spots in corporate dealmaking. For instance, Verizon Communications Inc.’s acquisition this year of a 45 percent stake in Verizon Wireless for $124.1 billion was the sort of megadeal that the market has not see since before the collapse of Lehman Brothers Holdings Inc. in 2008. According to mergermarket, that deal helped increase U.S. M&A deal value 22.3 percent for the first three quarters of 2013, compared with the first nine months of 2012. Strip out the Verizon deal, however, and M&A was actually down slightly year-over-year.

That said, several firm leaders we spoke with reported that they anticipated some improvement in the corporate climate in 2014. “We’re hoping for a bit more momentum on the corporate front,” says Barnes & Thornburg managing partner Alan Levin. “The trend lines are moving in a way that I think there should be some growth in 2014.”

As the business climate improves, more partners may be open to lateral moves, which could also bring more business to firms. “I think some good people have been hesitant to move because of uncertainty over their business base,” says Jim Maiwurm, chairman of Squire Sanders. “As they get more comfortable with their business flow, you could see more lateral movement.”

Asked to identify the practice areas that they think will be most financially challenged in 2014, 38 percent of respondents selected bankruptcy, followed by corporate. That result and the numbers for overall business bankruptcies in the United States confirm that the flow of restructuring work following the crisis has largely tailed off. According to the Administrative Office of the U.S. Courts, there were 34,892 bankruptcy filings in the 12 months ending Sept. 30, down from 42,008 in the 12 months ending Sept. 30, 2013, and far down from a postcrisis high of 58,721 in the 12 months ending Sept. 30, 2009.

Just as firms moved attorneys into burgeoning bankruptcy practices in 2009, they have now redeployed lawyers into corporate and finance work. “You need to be nimble and opportunistic in today’s environment,” says Brad Karp, chairman of Paul, Weiss, Rifkind, Wharton & Garrison.

Still, one feature of the post-Lehman landscape has remained constant: the increased importance of Washington, D.C., as a legal center. The U.S. capital was picked by 69 percent of respondents as the place where they expect to add laterals next year, closely followed by New York at 67 percent. The changing regulatory landscape, exemplified by the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act in banking, is leading firms to step up their efforts to expand their D.C. outposts.

In September, for instance, Palo Alto–based Cooley added 54 lawyers to its Washington, D.C., outpost when it merged with Dow Lohnes, a Washington-based firm with particular strength in advising the telecommunications sector. “It reflects the evolution of our model and our client base,” Cooley’s Conroy says of the deal. “There are certain regulated practices that are becoming key differentiators for firms like ours that have a large technology client base, and as those clients mature, they have more inside-the-Beltway needs.”

Other firms have seen a similar uptick in activity in Washington, D.C. “Our D.C. office has been our firm’s busiest over the last two or three years, reflecting extremely high litigation demand and the reality that the regulatory environment has become increasingly active and punishing,” says Karp, whose firm has represented JP Morgan Chase & Co., Citigroup Inc. and Deutsche Bank AG on crisis-related work.

While the fallout from the economic crisis has increased the importance of Washington, D.C., and fueled activity in litigation and regulatory practices, it has not had the profound impact on how firms bill their clients that some expected. On average, respondents said that just 18 percent of their firm’s matters include an alternate fee arrangement. “A substantial amount of our work is still based on hours,” says Barnes & Thornburg’s Levin. “Buyers of legal services grew up with that system and understand it.” Adds Cooley’s Conroy: “There’s been a significant market correction in the bargaining power of big firms, and clients have become more vocal about getting more value-driven billing arrangements. There’s been more talk than results, but what has happened is pervasive discounting, which is not an alternative billing arrangement.”

Squire Sanders’ Maiwurm, however, expresses surprise at our survey findings on the billing questions and says that he sees more interest in alternative arrangements. “There’s no question that some clients are not comfortable with a billing approach based on hours,” he says. But alternative fee arrangements, he says, “will become more widespread. They won’t become the majority, but they’ll definitely increase.”

The bottom line is that five years after the recession, the legal sector remains in flux, with no calming influence in sight. “The market rewards firms that are nimble and responsive to client demands, and are in the right commercial hubs,” Maiwurm says. Much may have changed since Leh­man’s collapse, but that assessment remains as true now as it ever was.

Read The 2012 Law Firm Leaders Survey.