How Coronavirus and a Bear Market Could Upend Law Firm Hiring
There's no sign yet of panicked hiring freezes, and offers are already out for the newest crop of associates. But the situation is evolving quickly, and even if it's very unlike the Great Recession, the pandemic is bound to affect the legal job market.
March 12, 2020 at 05:00 AM
5 minute read
When the U.S. stock market went into a tailspin in the fall of 2008, the response among law firms was swift and nearly uniform.
Hiring ground to a halt almost immediately after the Lehman Brothers bankruptcy prompted a 4.5% one-day drop in the Dow Jones Industrial Average on Sept. 15. Law students who were lucky enough to have interviews that August received offers, but after the crash, even those from top schools with the shiniest of resumes got nothing.
Fast-forward to this week, when the Dow sank by 7.8% on Monday, with the sudden start of a price war on oil compounding growing fears about the spread of the coronavirus, and it dropped another 5.8% Wednesday. Since peaking on Feb. 12, the index is down 20.5%.
And yet, firms have yet to panic, at least openly. Instead, the response has been dispersed and diverse.
According to Lateral Link managing director David Lat, some firms are carrying on as normal, while some are tweaking hiring procedures by turning to video conferencing or moving interviews outside of offices. Still others report they are putting certain searches on hold, or slowing their response times when they previously passed along decisions quickly.
"Firms are keeping their powder dry because of the unpredictability," said Lat, who as the founding editor of Above the Law, had a front-row seat for the last crisis. "It's hard to read things, because firms are taking different approaches."
One area where the impact should be minimal is on the newest entry-level associates. Both large firms and small firms have largely assembled their incoming classes.
"We did our hiring for the summer [and] fall months and months ago," said David Greenwald, managing partner at Fried Frank Harris Shriver & Jacobson. "That's locked and loaded."
Same for Washington, D.C.-based tax boutique Caplin & Drysdale, although the timing was closer.
"[On campus interviews] just finished, and the summer offers are out," said firm administrator John Riggleman. "Three weeks back, it probably would have had a greater impact."
And while some firms elected to defer the start dates of incoming associates and even rescind offers during the Great Recession, that talk has not yet entered the conversation. Nor have firms said they are categorically halting lateral hiring in the face of economic uncertainty.
"I don't think this is anything like what we saw in 2008, when people had offers withdrawn," said Jeffrey Lowe, the global practice leader of Major, Lindsey & Africa's Law Firm Practice Group. "I think everyone's responses have been really measured and thoughtful and I think we're going to get through this just fine."
Michael Ellenhorn, founder and CEO at competitive intelligence outfit Decipher, said that demand for the tools his company provides to help law firms evaluate laterals has stayed steady.
"We are not seeing a slowdown in volume," he said.
Nonetheless, the mechanics of the hiring process are bound to be affected, and a slowdown in lateral hiring is a distinct possibility, if only for short-term practical considerations. Turning to Skype interviews is useful at the start of the process. "But at some point, [candidates] are going to have to come into the office and meet people," Riggleman said.
But in Lat's experience, that's not always the case. He was recently working with an attorney based in Asia who was eager to land a job back in the U.S. After a videoconference, the candidate landed an offer on the spot.
"For the firms that are willing to proceed with hiring in this environment, they can get talent that they would otherwise have trouble getting," he said. "I think there's an opportunity for firms that stay the course and don't panic."
And, if stocks continue their slide into a bear market, some transactional practices will undoubtedly suffer. But other work, notably restructuring and energy deals, could see increased demand, and bold firms might already be looking for the right candidates to help them scale up their capabilities.
Lat said that, for now, market watchers can take comfort in the fact that not a single firm has explicitly said it is retrenching or freezing all its hiring.
"You're not seeing a plethora of withdrawn searches," he added.
But much rests on the coming weeks. Will firms simply continue to make short-term adjustments to how they bring new lawyers on board? Or will the continued spread of the virus be the weight that drags the economy into recession, forcing a long-term evaluation of strategic needs?
Buckle up. Or maybe the guidance should be, "Wash your hands."
Additional reporting by Jack Newsham.
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