A tale of two job markets

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By Carol Lundberg
Dolan Media

When the National Association for Legal Career Professionals released a report in June, declaring that new law school graduates face the worst job market since the mid-1990s, it was dire.

Its data pointed to a job market that was being squeezed under the weight of the same shrinking economy that’s keeping national unemployment numbers hovering between 9 percent and 10 percent.

But then, earlier this month, the Bureau of Labor Statistics released its 10-year study of legal professions, and its data painted a picture of near-full employment for lawyers and related professionals.

So who’s right?

Both, said John Hern, CEO of Clark Hill PLC in Detroit.

“From everything we read, law school placement offices have been having a hard time placing graduates,” he said. “The economy did add in July 4,000 new jobs for lawyers, but that was after a serious roller coaster of data for the first half of the year.”

The Bureau of Labor says that the average unemployment for all professions was 9.6 percent in 2010, but lawyers enjoyed the low rate of just 1.5 percent. Legal professions held up well, with unemployment at 2.7 percent, according to the Bureau. Only health care and technical occupations fared better, with unemployment at 2.5 percent.

“Compared to other sectors, like manufacturing, automotive and financial services, where tens of thousands of jobs have been lost, the legal profession has not had that massive tailspin decimation,” Hern said. “But if you look at the legal industry in general, it is still shedding jobs, or it was for the first part of the year. Through the end of May this year, the industry lost several thousand jobs. It has been protracting. In June, it started coming back, but slowly.”

Hern’s observation is more in line with what NALP reported earlier this summer. NALP only reported on law school graduates, who according to its data are less likely to land a job, particularly a job that requires bar passage. Those who do find work are working for less money.

“A bare majority of graduates obtained a job in private practice,” according to the report. “At 50.9 percent, this percentage dropped a full 5 percentage points from 2009 and is thus a considerable contrast to the previous 17 years, when the percentage ranged from 55-58 percent.”

Part-time employment reported at 11 percent, compared to 6.5 percent in 2008.

Salaries are lower, too, according to NALP, which said that in 2010, new lawyer salaries of $160,000 and higher account for less than 18 percent of all the salaries reported by new law school graduates. In 2009, 25 percent of new lawyers earned that much. Further, “Salaries in the $40,000 to $65,000 range accounted for almost half of reported salaries, compared with about 40 percent for the previous two classes.”

The problem is only partly the economy, said David Foltyn, CEO of Detroit-based Honigman Miller Schwartz and Cohn LLP. The rest of it is simple supply and demand.

“There is an absolute glut of law schools and law students,” Foltyn said. “There will be 44,000 or 45,000 students graduating from law schools this year. Does the market need that many?”

He said that law students with the right academic credentials will always be in high demand. His firm, he adds, always seeks out the best and brightest from schools like the University of Michigan and Harvard Law.

But students who are graduating from less prestigious schools are going to have a tough time, and it’s not only because the economy is slow.

The economy, he said, is providing enough work to sustain good law firms that are expanding in high-demand areas. For example, in 2008, he said the firm had 10 intellectual property lawyers. Now it has 35. Since January 2009, the firm has added 57 lawyers, Foltyn said.

“But there are just too many students. It’s very profitable for the law school to grow like that. You don’t need a lab. You need a professor and a big room, and you can put 100, 200, 300 students in a class,” he said. “An associate out of law school is earning $115,000 with us: everyone wants that job. And there aren’t 45,000 jobs of that magnitude out there.”

That’s a complaint Don LeDuc, president of the Thomas M. Cooley Law School, is hearing a lot of these days.

“I think NALP has badly overstated the data,” LeDuc said. “The downturn year came in 2007, that was the peak. Comparing everything to 2007 isn’t an accurate picture of the market.

“Also, there is no perspective. How are law school graduates doing compared to graduates in other fields, like medical school, or CPA programs?”

He contends that even in a tight markets, students who study tax law, corporate law and finance, insurance law, homeland security, internet law and IP will do very well, as those jobs are in high demand.

The law school is being sued in a class action for allegedly misleading prospective students with fraudulent job placement statistics.

The NALP data is used liberally in the suit, MacDonald, et al. v. Thomas M. Cooley Law School, filed in the Western District of Michigan on Aug. 10.

But what the data really points to is a job market that isn’t all that bad, LeDuc said.

While he said that coastal firms, which had a very steep run-up prior to 2007, and finance law firms in New York and Washington, D.C., have been hit hard in recent years, mid-sized, middle-of-the-country, and smaller firms have held steady in recent years.

As for the lawsuit, he said the complaints within it are complaints about the job market in general.

“It’s almost all about law schools in general,” LeDuc said. “Everybody represents their data in the same way. We use the NALP data for everything. … Then ABA has a questionnaire and everyone uses their NALP data to report to the ABA.

“Our stuff is submitted into those two just like everyone else’s. We are at a loss to understand why we would be singled out.”

Still, he acknowledges that new law school graduates are having a tough time, even if the market for lawyers is stable.

“There will be 44,000 new law school graduates. If 1 percent are struggling to find work, that’s a lot of people. But it’s still a small percentage compared to the rest of the economy.” LeDuc said.

“You have to put it in perspective. NALP says 6.2 percent don’t find employment of any kind in nine months. In an economy like this, you’re doing better than the rest of the economy; especially if some of those who don’t find work in nine months haven’t passed the bar exam yet.”

Hern, of Clark Hill, said that he would like to believe that the small growth in the number of legal jobs in June was a signal that law is on the cusp of a boom.

But he can’t.

“If you would have talked to me in mid-June, I would have said yes,” he said of whether he predicts a rebound soon. “Then Aug. 2 came, and we kicked the deficit can down the road again. As a reaction, the stock market dropped 20 percent and banks are going to clam up again, just as they were starting to make loans.”

But Hern hedged his bet against impending growth in his profession: “But if you ask about my long-term outlook, I’m still optimistic.”