The Q2 2020 Thomson Reuters Peer Monitor Economic Index (PMI) report showed the large law firm market struggled in the second quarter as a result of stay-at-home orders, court closures and broader economic slowdowns.

The PMI dropped by six points to 51, with demand for law firm services enduring its largest quarterly drop since 2009, down 5.9%. Most major practices saw sizeable declines. Litigation dropped 7.5%, impacted by court closures and case postponements. Transactional practices were down, with corporate work slipping 5.5%, tax work down 9.1% and real estate falling 12.2%.

“These are unprecedented times for the legal industry,” said Mike Abbott, vice president, Market Insights and Thought Leadership, Thomson Reuters. “While many firms are successfully adjusting their business models to work-from-home, they are still subject to the volatility and uncertainty surrounding their clients as well as the overall economy.”

Other practices saw more modest declines, such as labor and employment, which fell 4.4%, and patent prosecution, which was down 2.5%. Bankruptcy was one of the few practices that saw an increase in demand, surging 6.2% in the quarter.

Rate growth hit record highs, as worked rates rose 5.2%. Yet Peer Monitor analysis revealed much of the increase was attributable to some of the reduced workload shifting from associates to partners, raising average hourly billings.

Abbott noted, “We see law firms making rapid adjustments to better suit the current conditions – investing in productivity-enhancing technologies such as collaborative and remote work solutions, while reducing expenses in other areas such as overhead. More uncertainty lies ahead in coming months, but firms are clearly making efforts to improve efficiency and flexibility to deal with what’s to come.”

What happens in the third quarter and beyond is contingent on how the economy and population at large is affected by the ongoing pandemic. The report states that it’s hard to imagine a significant bounce back in the legal industry if COVID-19 cases continue to rise at an accelerating pace.

For more insights, download a copy of the Q2 2020 PMI report. For more information on Peer Monitor, visit http://legalsolutions.thomsonreuters.com/law-products/solutions/peer-monitor.

The PMI, produced by Thomson Reuters, is a composite index of law firm market performance using real-time data drawn from major law firms in the United States and key international markets.