Thomson Reuters will issue the Q2 2021 Peer Monitor Economic Index (PMI) report on Aug. 9, marking the first full-year report since the COVID-19 pandemic hit. Issued quarterly since 2006, the reports explore law firm market performance using real-time data drawn from major law firms, examining drivers of law firm profitability, including rates, demand, productivity and expenses.

Ahead of the second-quarter report, Legal Current looks back at the highs and lows of Peer Monitor scores and how they gauge the overall health of the legal industry.

Highs and Lows

The all-time high PMI rating was 70, hit in Q4 2006 – just ahead of the Great Recession, an economic upheaval that started with the subprime mortgage crisis and led to the 2008-09 worldwide financial crisis.

Not surprisingly, the two lowest PMI scores followed – 42 in Q4 2008 and 40 in Q1 2009 – as the Great Recession took hold. The Q1 2009 PMI report prompted a FindLaw blog to proclaim, “Report Confirms It: 2009 Will Most Likely Be As Bad As 2008,” while headlined its coverage: “Law business index reports ugly first-quarter results.”

Fortunately, PMI ratings, like the economy, eventually rebounded. The single-largest quarterly increase – 11 points – has happened twice. The initial 11-point jump was in Q4 2017, which marked the first time in more than six years that all three of the largest practice areas – litigation, corporate and labor & employment – had a positive quarter for demand growth. The second 11-point spike was in Q4 2020, highlighting the resiliency of the legal industry as law firms implemented multiple strategies to address the challenges due to the impact of the pandemic.

Strong improvement in law firm performance also has been seen in the two most recent PMI ratings – 62 in Q1 2021 and 69 in Q4 2020 – which marked two of the highest scores ever. The previous quarters’ scores reflect how proactive rate strategies, aggressive cost cutting, successful remote-working models and increased investment in technologies are helping law firms cope in the face of unprecedented challenges.

Predicting the PMI Score

Will these trends continue for the Q2 2021 rating?

As reporter Andrew Maloney noted in coverage of the Q1 2021 PMI report: “The first quarter of 2021 could be the last quarter in which there are dramatic expense reductions, especially since the numbers are reported on a year-over-year basis and the second quarter of 2020 saw some dramatic expense cuts as COVID shut down much of the economy.”

Is demand still recovering? Will rates remain high? Can overhead expenses keep shrinking? Share your Q2 prediction by leaving a comment below, or share on social media, tagging @Legalcurrent and #PeerMonitor in your prediction.

The Q2 2021 report on Aug. 9 will reveal whether the legal market is rebounding, growing or reversing course – and you can find out if your prediction was correct.

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