Legal sector struggling, reports suggest

A significant drop in jobs in the legal sector over the past two months and a not so sluggish rise in billing rates in 2010 indicate that law firms are still struggling to overcome the economic slowdown.

According to the latest employment report from the U.S. Bureau of Labor Statistics, the legal services sector lost 1,100 jobs in November. The sector had experienced a drop in October as well.

The sector last saw gains in September when 1,400 new jobs were created.

There were 100 less legal jobs in the U.S. in November 2010 than in November 2009.

Meanwhile, law firms somehow managed to jack up their billing rates in 2010, but by only a fraction of the rate they grew during the boom years of the mid-2000s, according to The National Law Journal's annual survey of hourly billing rates.

The average firm wide billing rate at the country's biggest law firms increased 2.7 percent in 2010, the NLJ report said.

It's the second straight year of growth rates less than 3 percent, which is a far cry from the standard 6 percent to 8 percent increases from 2004 until 2008 and just slightly higher than the rate of inflation, the report added.

According to the survey, the average sector-wide billing rate for partners in 2010 was $470, up 3 percent from $456 in 2009. For associates, the average billing rate was $294 in 2010, up about 2.5 percent from $287 in 2009.

Out of the law firms surveyed, 75 percent said they had raised rates in 2010 while 8 percent said the billing rates were unchanged. Shockingly, 17 percent of the surveyed law firms said they had lowered their billing rates.

Many law firms said pricing pressure from clients and fierce competition make it difficult for them to jack up billing rates sharply. In fact, a recent survey of executives from the 200 most profitable U.S. law firms by NLJ affiliate The American Lawyer has found that 90 percent of law firms expect to increase hourly rates by 5 percent or less in 2011.