Peer Monitor Economic Index Falls in First Quarter
PMI shows weakening law firm demand, slowing cost growth
Washington, D.C. – The Peer Monitor Economic Index (PMI), which measures the relative health of the legal marketplace, fell six points in the first quarter to a reading of 50. PMI is produced by the Hildebrandt Institute, part of Thomson Reuters.
PMI is a composite index of law firm market performance using real-time data drawn from major law firms in the United States and key international markets. A PMI of 65 or greater indicates strong law firm market performance.
Demand for law firm services weakened in the first quarter, although law firms saw some success in restraining costs.
Demand for law firm services fell 3.4 percent in the first quarter compared with the same time a year earlier. While the quarter had one fewer working day than a year ago, overall demand was soft and nearly all practice areas declined during the quarter. Demand for litigation work fell 3.7 percent during the quarter, its second consecutive quarterly decline. IP patent work was the only major practice area to show an increase in the first quarter, up 5.1 percent. Labor and employment fell 0.4 percent, and corporate work was down 4.4 percent. Real estate dropped 1.8 percent, tax work fell 5.9 percent and bankruptcy was down 9.0 percent.
Washington, D.C. was down only 2.7 percent, the best showing of any major market. Los Angeles fell 3.1 percent. New York and Chicago were both down 5 percent.
Worked rate growth was 3.1 percent, which was slightly below the rate growth seen for all of 2012.
The data indicates that firms are making more concerted efforts to try to control costs. For the first time in more than two years, the rate of growth slowed for both direct and overhead costs. Direct expenses rose 1.8 percent in the first quarter, continuing to slow from levels seen early last year. Overhead expenses were up 2,8 percent, the slowest rate since Q2 2011. However, costs are still not slowing fast enough to compensate for weakening demand.
“The first quarter turned in a fairly weak performance across the board,” said Mark Medice, program director of Peer Monitor. “Even some of the practices that had been relatively strong recently, such as transactional practices, have gotten off to a weak start in the first quarter. However, a more positive development is that firms are showing increasing success in controlling costs. Firms are focusing on improving efficiency, which is helping support profitability. In addition, it will leave firms well positioned to make significant gains if demand improves through the remainder of the year.”
For more information about the PMI and to review the latest PMI report, visit http://peermonitor.thomsonreuters.com.
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