Law Firm Profits Are Down Amid Rising Costs

New data from Wells Fargo’s Legal Specialty Group in the first half of 2022 has found that easing client demand amid rising costs is leaving newly hired lawyers with a lack of work. 

In 2021, a boom in corporate work prompted firms to build up their attorney numbers, with lawyer headcount increasing by over 5% year-over-year among the 120 large, mid-size and regional firms surveyed by Wells Fargo. However, slowing deal work has seen lawyer productivity drop to almost 5% compared to a year ago.

The findings by Wells Fargo are similar to those released a week ago by the Thomson Reuters Institute. The findings warn that law firms are facing economic struggles due to a drop in demand and rising costs. 

Wells Fargo found that, among the firms surveyed, lawyer compensation costs were up almost 17% over the past year and general expenses had increased by over 14%.