Recession

This month marks the fifth anniversary of the Great Recession: that downturn began in December 2007. The recession officially ended in June 2009 although, as the Bureau of Labor Statistics admits, "many of the statistics that describe the U.S. economy have yet to return to their pre-recession values." One of those key statistics is employment. This graph, created by the Federal Reserve Bank of Minneapolis, compares job recovery after the last three recessions.

The graph shows that after the 1990 recession, payroll employment took 30 months to reach pre-recession levels. For the 2001 recession, job recovery required 46 months.

But fifty-nine months after the start of the Great Recession, employment still lags well below pre-recession levels. In fact, the employment lag now (-3.0%) is deeper than the troughs of either of the previous recessions. At its depth, employment was off just just 1.4% for the 1990 recession; for the 2001 recession, the worst dip was 2.0%. (For the precise figures, click "View Data" on the Federal Reserve site linked above.)

Put these figures together and you'll discover that the job market has been distressed for seven of the last ten years. The 2001 recession ended by January 2002, but employment didn't recover fully until January of 2005. Then the Great Recession hit in December 2007. For payroll workers, the three good years of the last decade were 2005, 2006, and 2007. The other seven years (2003-2004, as well as 2008-2012) were lean ones.

The same is true of the market for law school graduates: three good years and seven lean ones. Except that for law graduates, even the good years weren't all that great. Data from NALP show that, within nine months of graduation, just 75.9% of the Class of 2001 secured jobs that required bar admission. The 2001 recession pushed that figure down to a low of 73.2% for the Class of 2004. Recovery from the early-century recession produced a peak in 2007: by the nine-month mark, 76.9% of that graduating class had obtained jobs requiring bar admission. But even during that peak year, almost a quarter of graduates from ABA-accredited schools lacked entry-level jobs as practicing lawyers.

Since then, of course, employment has fallen each year. By 2011, just 65.4% of graduates found jobs that required bar admission. Even fewer--just 56.0% of all graduates--had full-time work in that category nine months after graduation.

Now let's widen the time frame, looking at employment trends for law school graduates over the last quarter century. Before 2001, NALP did not distinguish between "Bar Admission Required" and "JD Advantage" positions; instead, it drew a line between "Legal Positions" and "Other Professional" positions. Those categories, however, were similar to the ones used today. NALP, for example, defined Other Professional positions to include jobs "in which a J.D. or some legal background is helpful or preferred, but not required, e.g. FBI special agents, insurance agents, claims representatives, policy analysts, and jobs with legal publishers." That definition is very similar to the one used today for "JD Advantage" positions.

The "Legal Positions" that law graduates obtained from 1985 through 2000, in other words, are very similar to the "Bar Admission Required" ones that schools report today. What happens if we plot those "Legal Positions" together with the "Bar Admission Required" ones? We generate this picture of the employment market for graduates of ABA-accredited law schools:

The percentage of graduates obtaining jobs as practicing lawyers, in other words, has been falling since 1988. The percentage drops sharply during recessions, and recovers modestly in the post-recession years, but those recoveries never match pre-recession highs. Each peak is lower than the last, and the trend since 2007 is straight down.

These facts suggest four things to me:  (1) Overall, the U.S. employment market is still in serious trouble. (2) The market for entry-level lawyers is suffering even more--it has been declining since 1988. Even if the market returns to the "highs" of 2005-2007, one quarter of graduates will not find work that requires bar admission. (3) Demand for entry-level attorneys will not, in any event, return to 2005-2007 levels. The above trend-line suggests this is unlikely, and there are plenty of real market forces (technology, outsourcing, unbundling) powering that trend-line. (4) Law schools, large law firms, and NALP (which represents schools and large firms) have been obscuring these trends by highlighting "total employment," BigLaw hiring, and BigLaw salaries.

But for those who care to look, the handwriting is on every wall.