The large law firm market saw a substantial recovery in the second quarter from the economic impact of the last year, with demand for law firm services rising above pre-pandemic levels. With rates remaining high, and many overhead expenses continuing to shrink, the Thomson Reuters Peer Monitor Economic Index (PMI), a composite index of law firm market performance, soared to a record high of 84.

The 22-point jump – the biggest quarterly increase in the history of Peer Monitor – shatters the previous all-time high of 70 hit in Q4 2006, just ahead of the Great Recession of 2008-09.

The dramatic rise in second-quarter demand was primarily driven by strength in M&A and other corporate work. Several other practice areas, including real estate and employment, also saw demand grow to above pre-pandemic levels. A partial recovery in litigation also contributed. While rate growth slowed slightly from recent quarters, it was still a solid 3.4% this quarter.

Meanwhile, overhead costs such as office expenses, continued to decline, even as many firms prepare for a return to the office. Expenses for technology and knowledge management, including library services, were notable exceptions, rising in the second quarter as firms continued investing in resources to support lawyers’ workflow – both remote and in-office.

For an in-depth analysis on the factors and trends contributing to the record-high PMI, watch the interview with Bill Josten, manager, Enterprise Content –Thomson Reuters Institute.

Download a copy of the Q2 2021 PMI report, and learn more about Peer Monitor here.

The report notes that many of the current drivers of law firm profitability will continue to shift in coming months as demand and rates adjust to the still-evolving paths of the economic recovery and the pandemic.