Business as usual

Some of the associate jobs that disappeared during the Great Layoffs of 2023-24 aren't coming back

Last week, Fenwick announced layoffs that impacted 10% of the firm. The layoffs weren’t a huge surprise. Over the past year, many firms have been laying off their staff—whether through announced layoffs or through stealth layoffs. The conventional view is that this trend is driven by reduced demand in practice areas related to capital markets, major transactions, and/or supporting tech companies. Katherine Loanzon pointed out in a Bloomberg Law article covering the Fenwick layoffs that these tech-focused firms “all put their eggs in one basket, in one industry, that’s not doing well right now.”

There are other factors at play too. In that same article, Kate Reder Sheikh pointed out that there’s also the impact of 2021 over-hiring and the recent associate salary raises. “I don’t think any bubble has burst,” she said. “The work will return, but it may not be coming simply fast enough for these firms to keep up, especially with the pay raises that were given.”

This commentary strikes me as right. Katherine and Kate are both legal recruiting veterans who have seen multiple cycles play out, and have a ton of sources in the market. It all makes sense. To me though, the most interesting part of all this is, well—what happens next?

Many people believe it’ll play out just like it has before. Over the past few decades, large law firms have never been able to successfully match supply and demand perfectly. Not just in tech, but in other practice areas too. During slowdowns, firms let go of too many people. When demand returns, firms end up understaffed and start aggressively recruiting associates to replace the ones they laid off. The jobs that were cut end up re-appearing a few years later.

I think this time might be different though. I alluded to it in my LinkedIn post this week. I believe 3 major trends that are playing out right now, in 2024, will prepare law firms to do more work with fewer people. Specifically, fewer associates. Here’s why.