Legal Sector

CLASS OF 2017 EMPLOYMENT REPORT: Take That, JD-Advantage Jobs!

So I was all set to write up the class of 2017 employment report two weekends ago, but I went out of town twice, so that distracted me from my very important blogging duties. To make up for that I’m redoing my annual employment report by foregrounding the actual important information and editorials and then following up with the employed-bar-passage-required full-time, long-term ranking of shame.

To begin with, here’s the table of graduate underemployment. (Everything on this post excludes the three Puerto Rico law schools.)

STATUS (EXCL. P.R.) 2010 2011 2012 2013 2014 2015 2016 2017
Unemployed – Not Seeking 1,245 1,014 939 795 553 494 469 441
Unemployed – Seeking 2,686 4,016 4,770 5,060 4,103 3,744 3,142 2,614
Status Unknown 1,458 1,453 1,073 979 841 766 557 437
Total Grads 43,526 43,735 45,757 46,112 43,195 39,423 36,619 34,392
Unemployed – Not Seeking 2.9% 2.3% 2.1% 1.7% 1.3% 1.3% 1.3% 1.3%
Unemployed – Seeking 6.2% 9.2% 10.4% 11.0% 9.5% 9.5% 8.6% 7.6%
Status Unknown 3.3% 3.3% 2.3% 2.1% 1.9% 1.9% 1.5% 1.3%
Total Percent 12.4% 14.8% 14.8% 14.8% 12.7% 12.7% 11.4% 10.2%

For ’17, the underemployment rate (“Total Percent” in the table) fell by yet another percentage point, almost all of which appeared in the Unemployed – Seeking category. This is good news. 10.2 percent is still a terrible rate, to say nothing of the 7.6 percent seeking work, but progress is progress.

On the reverse side, 67.1 percent of graduates found full-time long-term work in bar-passage-required jobs. Last year, that figure was 62.5 percent, so this is quite the jump. In three years, the percentage has risen by 10 points, which is quite notable, except that the absolute number of students finding these jobs has been roughly the same each year. Reducing students at unheralded law schools reduces poor outcomes.

So what differed this year? Let’s take a look at the analytic tables that compare this year to last year.

EMPLOYMENT STATUS NO. OF GRADS GRADS PCT. OF TOTAL PCT. CHANGE IN GRADS DISTRIBUTION OF CHANGE IN GRADS GINI COEFFICIENT
2016 2017 2016 2017 2017 2017 2016 2017
Employed – Bar Passage Required 23,833 23,939 65.1% 69.6% 0.4% -4.8% 0.34 0.34
Employed – JD Advantage 5,162 4,021 14.1% 11.7% -22.1% 51.2% 0.36 0.38
Employed – Professional Position 1,390 1,091 3.8% 3.2% -21.5% 13.4% 0.54 0.54
Employed – Non-Professional Position 435 401 1.2% 1.2% -7.8% 1.5% 0.54 0.55
Employed – Law School 757 605 2.1% 1.8% -20.1% 6.8% 0.80 0.79
Employed – Undeterminable 21 23 0.1% 0.1% 9.5% -0.1% 0.95 0.92
Employed – Pursuing Graduate Degree 600 535 1.6% 1.6% -10.8% 2.9% 0.50 0.52
Unemployed – Start Date Deferred 253 285 0.7% 0.8% 12.6% -1.4% 0.64 0.59
Unemployed – Not Seeking 469 441 1.3% 1.3% -6.0% 1.3% 0.57 0.52
Unemployed – Seeking 3,142 2,614 8.6% 7.6% -16.8% 23.7% 0.46 0.43
Employment Status Unknown 557 437 1.5% 1.3% -21.5% 5.4% 0.67 0.66
Total Graduates 36,619 34,392 100.0% 100.0% -6.1% 100.0% 0.29 0.29
EMPLOYMENT TYPE NO. OF GRADS GRADS PCT. OF TOTAL PCT. CHANGE IN GRADS DISTRIBUTION OF CHANGE IN GRADS GINI COEFFICIENT
2016 2017 2016 2017 2017 2017 2016 2017
Solo 508 439 1.4% 1.3% -13.6% 3.1% 0.61 0.58
2-10 6,269 5,773 17.1% 16.8% -7.9% 22.3% 0.35 0.33
11-25 1,739 1,695 4.7% 4.9% -2.5% 2.0% 0.41 0.42
26-50 942 998 2.6% 2.9% 5.9% -2.5% 0.43 0.45
51-100 797 800 2.2% 2.3% 0.4% -0.1% 0.48 0.48
101-250 958 977 2.6% 2.8% 2.0% -0.9% 0.51 0.51
251-500 1,008 1,003 2.8% 2.9% -0.5% 0.2% 0.68 0.64
501-PLUS 4,243 4,611 11.6% 13.4% 8.7% -16.5% 0.78 0.77
Unknown 228 96 0.6% 0.3% -57.9% 5.9% 0.91 0.85
Business Industry 4,930 4,142 13.5% 12.0% -16.0% 35.4% 0.36 0.36
Government 4,402 4,133 12.0% 12.0% -6.1% 12.1% 0.32 0.32
Public Interest 1,638 1,617 4.5% 4.7% -1.3% 0.9% 0.47 0.48
Federal Clerkship 1,197 1,170 3.3% 3.4% -2.3% 1.2% 0.72 0.69
State/Local Clerkship 2,091 2,050 5.7% 6.0% -2.0% 1.8% 0.58 0.58
Other Clerkship 20 24 0.1% 0.1% 20.0% -0.2% 0.93 0.93
Education 583 483 1.6% 1.4% -17.2% 4.5% 0.49 0.48
Unknown Employer Type 45 67 0.1% 0.2% 48.9% -1.0% 0.94 0.91
Total Employed by Type 31,598 30,078 86.3% 87.5% -4.8% 68.3% 0.30 0.31

For ’17, there were 2,227 fewer graduates than in 2016, a decline of 6.1 percent. Three employment statuses accounted for nearly 90 percent of the difference between the two classes: Employed JD Advantage (51.2%) (!), Unemployed – Seeking (23.7%), and Employed – Professional Position (13.4%). This pretty much tells you what you need to know about this year’s employment report.

Changes among the employment types accounted for 68.3 percent of the 2,227 graduates. The four largest drivers were business-and-industry jobs (35.4%), 2-10-lawyer practices (22.3%), government jobs (12.1%), education positions (4.5%), and solo practices (3.1%). Notably, jobs at 501-plus-lawyer firms grew by 368 people, so it pushed back against the graduate decline (-16.5%). Biglaw’s gains are consistent with last year’s trends, as is the decline in small-law jobs.

I won’t discuss the Gini coefficients as I did last year. The most desirable jobs are still distributed worse than wealth in a kleptocracy.

Editorial: This year’s employment report showcased many of the similar trends from last year: Good outcomes substituting for worse ones. It differs in that JD advantage jobs took a big hit while bar-passage-required jobs grew slightly. What’s interesting here is that overall, law-firm jobs fell nonetheless. Somewhere in the employment type outcomes are compositional changes where grads found law jobs and not JD advantage jobs. I sure hope none of that is accounting shenanigans by law schools.

Finally, I’m happy that the ABA has not implemented its decision to change how it collects and displays employment data. Readers will note that I did not repeat the mistakes regarding law-school-funded jobs that I made last year, and yes, I recognize that perhaps I don’t find much use for short-term or part-time job categories. Nevertheless, the purposes of careful data collection are usefulness, detail, transparency, and consistency—not what’s convenient for law-school employees.

That’s all for now.

Similar editions of this post from prior years can be found here:

W&S Lawyer Employment Inches Up in 2017, Incomes Inch Down

The Bureau of Labor Statistics (BLS) usually completes its updates of its many measures of occupational employment for the previous year by April. Data for 2017 are now available, allowing a comprehensive summary of lawyer employment for that year. For detailed discussion of what the BLS datasets are and how they address lawyer employment, I recommend the lawyer overproduction page [updated!].

For context, according to the Current Population Survey (CPS), the number of people who reported working as lawyers in 2017 grew trivially to 1,137,000, up just 4,000 people. The CPS also estimated 781,000 people working as lawyers on a wage or salary basis, a 4.8 percent rise from the previous year (+36,000 lawyers). By contrast, the more accurate Occupational Employment Statistics (OES) program found that the number of wage-and-salary lawyers grew by 1.4 percent last year to 628,370 (+8,840 jobs). The number of employee lawyers in the legal sector also grew by 1.4 percent to 388,670 (+5,940).

Employee lawyers’ incomes fell slightly in 2017. The OES estimated a -1.2 percent median hourly wage decline, although the CPS registered a striking 6.0 percent median weekly wage increase. Going by the OES, the last peak for lawyers’ earnings was 2009 (~$125,000 annually); incomes are about 7.8 percent lower (-$9,800) in real dollars since then. Here is an annualized dispersion.

These lawyer employment and income measures are not strong bellwethers for the value of legal education because they include many established lawyers and don’t measure recent graduate outcomes particularly well, especially those of graduates who do not promptly start careers in law. Readers seeking insight into that topic are instead advised to look at my criteria for predicting improvements in law graduate outcomes and the lawyer production page for a clear discussion of the BLS’s Employment Projections program.

**********

Prior editions of this post:

What Recovery? Legal Services Industry Grows 0.2 Percent in 2016

Last year I celebrated a full 2.0 percent growth in the legal-services industry, according to Bureau of Economic Analysis reports. Alas, this year it’s all been dashed away and revised. Instead of 2.0 percent growth, we have 0.2 percent growth, and the figure for 2015 has been revised downward to 0.4 percent. Sad trombone.

The whole economy grew 1.5 percent to the legal sector’s 0.4 percent.

(Source: Bureau of Economic Analysis (BEA))

Since 2008, the legal sector has contracted by a cumulative 23 percent. It is about the same size as in 1995.

As for the composition of the legal sector’s value added, it’s mostly attributable to … taxes (+0.4 percent). The gross operating surplus, i.e. what goes to firm owners, was down 0.1 percent, and total compensation has been flat two years in a row. Since 2008, compensation of employees has contributed -7.5 percent to the legal sector. The gross operating surplus added -15.5 percent, and taxes contributed nothing.

Finally, consistent with flat growth in the legal sector, household consumption of legal services fell by 1 percent, but it at least grew by 2 percent in 2015. Since its peak year, 2003, spending on legal services has dropped by 12.5 percent.

Households consume about as much in legal services of their total consumption as they did in 1982.

Last year I wrote that the legal-services sector can’t shrink forever, but sustained growth is still nowhere to be found. Looking at how much it’s fallen behind the rest of the economy, it’s surreal to think about how much growth would be needed for it to catch up.

Class of 2016 NALP Data

Happy post-Labor Day. Now back to work, Peasants!

Or, read on.

A few weeks ago, the National Association for Law Placement (NALP) published the national summary report for its Employment Report and Salary Survey (ERSS) (pdf). As with the last two years, I comb the data for more information that the NALP may not have commented on. Much of the NALP report focuses on year-over-year changes to percentages of employed graduates that aren’t very illuminating, especially when the resulting percentages of employed graduates are barely budging. Here’s what they look like.

I’m aware that we now have three consecutive years of data showing graduate employment outcomes ten months after graduation rather than nine, but I really don’t think that makes much of a difference.

It appears that the percentage of graduates not working fell a whopping 0.8 percent. Whoa.

Here’s also the number of graduates employed by status.

We’re seeing a pretty steep fall in total graduates, but the number and proportion of them not working is still higher than the peak employment year of 2007. A lot of this is elevated bar failure rates, but even so the JD-advantage category is still elevated. The NALP says 40 percent of grads in these jobs are seeking other work, which tells me these positions aren’t worth much. In fact, much of their growth (not shown) is visible in business-and-industry positions, further suggesting the definition of JD-advantage is overbroad. They also strongly correlate negatively with bar-passage-required jobs and positively with grads not working.

Here’s the contribution to the percent change in law grads by employment status since 2007 and going back to 2001. We can see that despite falling total grads, a greater proportion of them are either not working or in JD-advantage positions (which are probably not legal jobs themselves).

Meanwhile, with bar-passage-required jobs contributing -15.7 percent to the -14.6 percent change in law-grad outcomes, here’s how private-practice positions have fared (-9.2 percent to all 2007 grads).

The class of 2016 is the first one to be wholly below the 2007 line, meaning that even tiny firms aren’t hiring grads like they did in the peak year. Supply of law grads does not create demand for legal services, strongly indicating that grads in past years who found these jobs only worked in them transiently until they left the legal labor market.

The NALP’s selected findings (pdf) discuss “tightness” in the job market now or at least compared to the pre-recession market. The large fall in bar-passage-required jobs and private-practice jobs argues otherwise. A tighter market would see more grads working in bigger firms and smaller firms raising wages, something the NALP’s own data don’t depict.

********************

Prior reporting on this topic:

W&S Lawyer Employment Grows Trivially in 2016, Incomes Still Flat

The Bureau of Labor Statistics (BLS) usually completes its updates of its many measures of occupational employment for the previous year by April. Data for 2016 are now available, allowing a comprehensive summary of lawyer employment for that year. For detailed discussion of what the BLS datasets are and how they address lawyer employment, I recommend the lawyer overproduction page [updated!].

For context, according to the Current Population Survey (CPS), the number of people who reported working as lawyers in 2016 shrank 2.3 percent to 1,133,000—about where it was in 2014. The CPS also estimated 745,000 people working as lawyers on a wage or salary basis, a 7.2 percent decline from the previous year (-58,000 lawyers). This change is plausible because in 2015, the number rose 9 percent (+66,000) and could just indicate measurement problems with the CPS. By contrast, the more accurate Occupational Employment Statistics (OES) program found that the number of wage-and-salary lawyers grew by 1.6 percent last year to 619,530 (+9,600 lawyers). The number of employee lawyers in the legal sector grew only a negligible 0.7 percent to 382,730 (+2,550).

Employee lawyers’ incomes were flat again in 2016. The OES estimated a scant 0.7 percent median hourly wage growth, although the CPS registered a -0.7 percent median weekly wage increase. Going by the OES, the last peak for lawyers’ earnings was 2009 (~$125,000 annually); incomes are about 6.7 percent lower (-$8,400) in real dollars since then. Here is an annualized dispersion.

These lawyer employment and income measures are not strong bellwethers for the value of legal education because they include many established lawyers and don’t measure recent graduate outcomes particularly well, especially those of graduates who do not promptly start careers in law. Readers seeking insight into that topic are instead advised to look at my criteria for predicting improvements in law graduate outcomes and the lawyer production page for a clear discussion of the BLS’s Employment Projections program.

**********

Prior versions of this post:

Good News: Legal Services Industry Grew 2.0 Percent in 2015

Since I started writing here more than six years ago, it’s always been bad news for the legal services industry. Dwindling output, year in, year out. This time, no longer. We have growth: 2.0 percent in 2015.

gdp-and-legal-services-industry-value-added-1000s-chained-2009

(Source: Bureau of Economic Analysis (BEA))

And yes, thanks to an alert reader I can now show the BEA’s complete GDP-by-industry dataset going back to 1963! We can now see that if the legal services industry had maintained its mid-20th century growth rate it would be nearly double its current size. Imagine how much better law practice would be. You might think there’d be a need for more law schools to meet the demand.

Arguably, the government’s definition of the industry or its composition has changed over the decades as it has for other industries, but I doubt it. It’s mostly lawyers’ offices. Undeniably, though, the typical product of the legal services industry has changed. I’d bet that the weighted-average hour of legal work is very different now than in 1975. Even so, it’s still possible to give a dollar figure of how much stuff private practice lawyers are producing.

…And it ain’t much. The legal services industry produced less in 2015 than in 2012, 1995, and 1988. There’s room for a lot of growth. The sector peaked in 2008, and since then it’s shrunk more than 20 percent.

The other caveat is that the legal services industry’s growth this year is mostly attributable to the gross operating surplus (what goes to firm owners, partners, solos) as opposed to employee compensation, which better indicates budding demand for new lawyers. The breakdown is: gross operating surplus, +1.5 percent; taxes on production and imports, +0.5 percent; and compensation of employees, +0.0 percent.

Yeah. You read that right. 0.

However, compensation has shaved off growth since 2007, so maybe a zero year isn’t so bad. Here’s the chart of the industry’s components, which still only goes back to 1987:

components-of-legal-services-industry-real-value-added

Compensation of employees in the legal services industry peaked in 2003 at $121 billion (2009 $). Now it’s $97 billion, a similar 20 percent decline.

Finally, although the legal services sector did well in 2015, the rest of the economy did better: GDP grew 2.6 percent, of which 1.9 percent went to compensation of employees. Things still look better for non-law.

Finally, legal services as a share of household expenditures grew for the first time in thirteen years.

legal-services-share-of-household-consumption-expenditures

At its maximum, households spent $99.5 billion on lawyers in 2003. Now it’s $87.9 billion, down 11.7 percent.

I’ve written elsewhere that the legal services sector can’t shrink forever into nothing. It’s like estimates of the year Japan’s population reaches zero. So we were bound to have some good years. What we need is evidence of sustained growth, especially in employee compensation. Instead, that’s not going anywhere, but at least it’s not falling anymore.

Class of 2015 NALP Data: The Mid-Law Crunch

A few weeks ago, the National Association for Law Placement (NALP) published the national summary report for its Employment Report and Salary Survey (ERSS) (pdf). Unlike last year, the chart lists the total number of graduates and the number who reported employment information, and the NALP updated its ERSS national summary chart for the class of 2014 to include that as well. I chided the NALP for omitting these last year, but that’s not a problem now. Good.

My goal today is to quickly glance at the ERSS for information the NALP might not have reported or missed, and to add to the time-series displays of graduate employment outcomes I provided last year. The NALP’s data are far easier to work with than the ABA’s when it comes to longitudinal trends, so this is where to get it. Nevertheless, I don’t have much to say.

The NALP’s selected findings (pdf) focused on the number of graduates finding private practice jobs, the lowest since 1996. There were undoubtedly fewer than 40,000 graduates that year, so compared to 39,984 this year, this is understandable. What is new, as I discussed in May, is that even though the number of graduates fell, the proportion of them finding better work didn’t improve. Large percentages are still working in “JD-advantage” jobs and nearly 11 percent reported being unemployed. This is not what a law-graduate recovery would look like.

percent-employed-by-status-nalp

no-grads-employed-by-status-nalp

Last year, at least, there was some rise in the proportion of employed grads. This year nothing’s changed. Blame all the grads who failed the bar, I guess.

As for the kinds of jobs grads are getting, I’m seeing a mid-law crunch since 2007 that I don’t believe the NALP has discussed.

no-graduates-employed-by-size-of-firm-nalp

cumulative-percent-change-in-grads-employed-in-law-firm-jobs-by-firm-size-index-2007100-nalp

(Sorry this one’s a little unclear.)

In fact, hiring at firms with 51-250 lawyers shrank the most since 2007, more than 30 percent in each category. Smaller firms have grown—but are now shrinking—and the biggest firms are making a comeback.

I’m not a biglawologist, nor a midlawologist, but if the big firms aren’t annexing the middle ones, then this is a chunk of the profession that’s shrinking. Looking at the After the JD II data, which I know is dated, middle-sized practices tended to have low outflow rates compared to other practice areas. Aside from government work, maybe these were among the best long-term jobs one could get out of law school?