US law firm leaders feel the economy is stabilising and could even improve over the next six months, according to new research.

The survey by consultants Hildebrandt International found that two-thirds of managing partners or chairmen at major US firms believe the economy is the same or better than six months ago.

In addition, 59% of the 133 responding law firm leaders said they expect a stable or improving economy over the next six months, in what will be taken as a positive signal from the world's largest legal market.

However, many still expect layoffs in the near future due to rising expenses.

More than one in three managing partners expect to cut non-equity lawyers in the near future, and one in four anticipate their equity partnership will shrink, according to Hildebrandt's Managing Partner Confidence Index, which was released on Tuesday (23 June).

The study surveyed the national leaders of each firm, the bulk of which are among the US's top 200 law firms.

"It has been a brutal six months," the report says, "but there is a strong sense among law firm managing partners that the worst of the recession may finally be over."

Morrison & Foerster chairman Keith Wetmore, who participated in the survey, said the results largely reflected his views.

"Conversations with clients have a lot more optimism than they had six months ago," Wetmore said. "Many businesses have a feeling that they are no longer staring into an abyss."

The survey uses a 200-point scale, with 100 points being a "neutral" feeling, and 200 representing perfect optimism.

The overall confidence index rose to 91 points, up from 68 last quarter.

"The outlook for our segment of the legal profession is stabilising but that there will continue to be a lot of focus on how we price our services," said Shane Byrne, managing partner of Baker & McKenzie's San Francisco office.

According to the survey, confidence about the economy at large was nearly neutral, at 99 points. But that was up from 49 points last quarter. Confidence in the legal profession specifically was also slightly pessimistic, at 90 points, but that marked a big improvement from 53 points last quarter. Expectations about demand for legal services rose to 91 points, up from 83 last quarter.

Anecdotal evidence in the UK suggests there has been a similar, albeit modest, improvement in the mood among European law firms since the first quarter, when Legal Week research found record lows in confidence.

However, according to Hildebrandt, profit and revenue growth expectations remained low, at 57 and 66 respectively.

And US managing partners expect expenses to keep rising, causing confidence in that area to fall to a new low of 37 points.

"With weak anticipated demand, managing partners are looking to reduce expense growth, primarily by cutting or freezing headcount, and this recession continues to be marked by record layoffs among law firms," the report says. "Currently 38% of MPs expect to make cuts in the associate pool over the next 12 months. Another 36% expect the number of associates to remain where it is and 26% anticipate adding to associate headcount."

A version of this story first appeared in The Recorder, Legal Week's US sister title.