RECESSION PANIC MEGAPOST: Bad economy threads go here! Forum

[Margarets]

Bear market sounds like a deeply troubled, bitter person. This market is going to be tough, but you'd have to be downright sanguine not to realize that. But, if you work hard and market yourself well, a firm offer shouldn't be hard to get.

What I actually fear the most is post-summer-associate-offer, when I'll be waiting by the phone the entire semester, hoping that bad news doesn't come my way. In my opinion, people should worry more about that.

Then again, that might not happen so much with the upcoming crop of SA's, since firms are, of course, hiring more cautiously.

[Margarets]

^^^ This is a somewhat good point. I've seen projections of hiring being down 36% this year.

My guess is that firms will try and spread out the hit over 2-3 OCI periods. They basically have to dump one whole class worth of graduates, and cutting 1/3 of hires over a period of 3 years will do the trick.

That's one way of looking at it. One possibility mentioned by a credible source is that firms will simply dump the incoming associates (that is, the class of 2009). I know, that seems like a terrible thing, and let's pray that doesn't happen, but I've heard that firms simply prefer new blood over old blood... even if the new blood is only one year younger than the old...

[Cleareyes]

I'd think long and hard before sinking 100 K + into ANY law school. The industry is in steep and rapid decline.

Ah, I always knew the day when JDU started decrying value of HYS even would come.

Are you illiterate? He said STEEP AND RAPID decline. By using those words with no particular supports behind them, and by ignoring the obvious fact that unless the U.S. truly collapses there will always be a need for lawyers and too few top tier law school graduates to fill that need, he has proved his point.

All disputes from now on will be handled by gun battles at high noon.

All Yale law grads will be cleaning toilets or, at best, cleaning the equipment of toilet cleaners after the toilet cleaners are done cleaning toilets.

All Stanford grads will have to get work manually inseminating horses, pigs, and syphilitic monkeys.

Every Harvard student will be summarily executed upon graduation. This will be a mercy.

[Cleareyes]

^^^ This is a somewhat good point. I've seen projections of hiring being down 36% this year.

My guess is that firms will try and spread out the hit over 2-3 OCI periods. They basically have to dump one whole class worth of graduates, and cutting 1/3 of hires over a period of 3 years will do the trick.

That's one way of looking at it. One possibility mentioned by a credible source is that firms will simply dump the incoming associates (that is, the class of 2009). I know, that seems like a terrible thing, and let's pray that doesn't happen, but I've heard that firms simply prefer new blood over old blood... even if the new blood is only one year younger than the old...

And how will firms who do that maintain credibility with top talent in 2010? Just promise that it won't be repeated even if the economy isn't recovering? Pinkie swear?

[dresden doll]

I'd think long and hard before sinking 100 K + into ANY law school. The industry is in steep and rapid decline.

Ah, I always knew the day when JDU started decrying value of HYS even would come.

Are you illiterate? He said STEEP AND RAPID decline. By using those words with no particular supports behind them, and by ignoring the obvious fact that unless the U.S. truly collapses there will always be a need for lawyers and too few top tier law school graduates to fill that need, he has proved his point.

All disputes from now on will be handled by gun battles at high noon.

All Yale law grads will be cleaning toilets or, at best, cleaning the equipment of toilet cleaners after the toilet cleaners are done cleaning toilets.

All Stanford grads will have to get work manually inseminate horses, pigs, and syphilitic monkeys.

Every Harvard student will be summarily executed upon graduation. This will be a mercy.

[doyleoil]

I'd think long and hard before sinking 100 K + into ANY law school. The industry is in steep and rapid decline.

Ah, I always knew the day when JDU started decrying value of HYS even would come.

Are you illiterate? He said STEEP AND RAPID decline. By using those words with no particular supports behind them, and by ignoring the obvious fact that unless the U.S. truly collapses there will always be a need for lawyers and too few top tier law school graduates to fill that need, he has proved his point.

All disputes from now on will be handled by gun battles at high noon.

All Yale law grads will be cleaning toilets or, at best, cleaning the equipment of toilet cleaners after the toilet cleaners are done cleaning toilets.

All Stanford grads will have to get work manually inseminating horses, pigs, and syphilitic monkeys.

Every Harvard student will be summarily executed upon graduation. This will be a mercy.

well, at least this appears to solve the interminable h vs. y vs. s debates (mercy execution ftw!)

[Margarets]

^^^ This is a somewhat good point. I've seen projections of hiring being down 36% this year.

My guess is that firms will try and spread out the hit over 2-3 OCI periods. They basically have to dump one whole class worth of graduates, and cutting 1/3 of hires over a period of 3 years will do the trick.

That's one way of looking at it. One possibility mentioned by a credible source is that firms will simply dump the incoming associates (that is, the class of 2009). I know, that seems like a terrible thing, and let's pray that doesn't happen, but I've heard that firms simply prefer new blood over old blood... even if the new blood is only one year younger than the old...

And how will firms who do that maintain credibility with top talent in 2010? Just promise that it won't be repeated even if the economy isn't recovering? Pinkie swear?

Very interesting point. It's actually really funny. Firm decisions about these things are very much driven by how much the talent will perceive them. In fact, some firms regretted laying off during the last downturn because, since there were so few that in fact laid off, they had to endure stigma during OCI: People simply weren't applying.

And even with this economy, firms were struggling not to layoff, or at least not to be the first. Many of the top, top, top firms are going to be the last to do these things–even if they are financially solvent–simply because they want to attract the top talent.

At the end of the day, though, if all firms are doing it, we simply won't have any option but to apply to them anyways. I mean, last August, we could've tried to choose firms based on who laid off whom, but now that's just impossible... as almost every big law firm in the food chain has laid off. If you only applied to firms that hadn't laid off, at this point, you'd have a TERRIBLE OCI (come to think of it.. where would you apply? Cravath, Cleary, Wachtell, SullCrom... I think that's it. Haha.).

So if all firms start dumping incoming classes, we really won't have a choice.


Also, about market salaries decreasing, there are multiple ways of looking at this:
1) This could be a good thing. For better or worse, law firms follow other law firms, especially market leaders (i.e., the V5, Latham, Cleary, etc.). The problem is that this leads some law firms to make some bad, bad, bad financial choices. NYC simply moved market to 160 because a major, market leading firm did, and all other firms followed. Whole cities followed NYC to avoid losing talent to the city. The problem is that... a lot of firms couldn't afford to pay their associates 160! What we're seeing, probably, is a lot of firms shifting to a more financially responsible compensation system. Of course, they'll suffer because talent will go for the 160k firms... but in this economy, I'm sure there is flesh blood that wouldnt mind "settling" for 145k.
2) Since law firms follow other law firms, I only see a decrease in market if a major market-leader decreases their starting salary... I just don't see that happening (for better or worse). The Vault 5 won't do it, Kirkland, Latham, Cleary, whatever, they won't do it. You will see some firms here and there do it, but it don't have much impact because no one will follow them.

The day you see a major, market-leading firm do something bad, start worrying. People were pretty optimistic when Skadden came out with their bonus structure... until Cravath did... and firms started following Cravath.

On the plus-side, when you see major, market-leading firms taking positive steps for their incoming class, expect other firms to follow suit (though, hopefully, a LITTLE more financially responsbily this time).

[Cleareyes]

Very interesting point. It's actually really funny. Firm decisions about these things are very much driven by how much the talent will perceive them. In fact, some firms regretted laying off during the last downturn because, since there were so few that in fact laid off, they had to endure stigma during OCI: People simply weren't applying.

And even with this economy, firms were struggling not to layoff, or at least not to be the first. Many of the top, top, top firms are going to be the last to do these things–even if they are financially solvent–simply because they want to attract the top talent.

At the end of the day, though, if all firms are doing it, we simply won't have any option but to apply to them anyways. I mean, last August, we could've tried to choose firms based on who laid off whom, but now that's just impossible... as almost every big law firm in the food chain has laid off. If you only applied to firms that hadn't laid off, at this point, you'd have a TERRIBLE OCI (come to think of it.. where would you apply? Cravath, Cleary, Wachtell, SullCrom... I think that's it. Haha.).

So if all firms start dumping incoming classes, we really won't have a choice.


Also, about market salaries decreasing, there are multiple ways of looking at this:
1) This could be a good thing. For better or worse, law firms follow other law firms, especially market leaders (i.e., the V5, Latham, Cleary, etc.). The problem is that this leads some law firms to make some bad, bad, bad financial choices. NYC simply moved market to 160 because a major, market leading firm did, and all other firms followed. Whole cities followed NYC to avoid losing talent to the city. The problem is that... a lot of firms couldn't afford to pay their associates 160! What we're seeing, probably, is a lot of firms shifting to a more financially responsible compensation system. Of course, they'll suffer because talent will go for the 160k firms... but in this economy, I'm sure there is flesh blood that wouldnt mind "settling" for 145k.
2) Since law firms follow other law firms, I only see a decrease in market if a major market-leader decreases their starting salary... I just don't see that happening (for better or worse). The Vault 5 won't do it, Kirkland, Latham, Cleary, whatever, they won't do it. You will see some firms here and there do it, but it don't have much impact because no one will follow them.

The day you see a major, market-leading firm do something bad, start worrying. People were pretty optimistic when Skadden came out with their bonus structure... until Cravath did... and firms started following Cravath.

On the plus-side, when you see major, market-leading firms taking positive steps for their incoming class, expect other firms to follow suit (though, hopefully, a LITTLE more financially responsbily this time).

I agree that if everyone does this then it won't affect anyone, but from what I understand law firms don't collude, they just compete in such a way that they mostly follow similar patterns of behavior. So someone would have to step up and can the whole class without knowing that others would follow. And then others might follow, but the remaining firms would be faced with a choice. Either can THEIR whole class, or hang on to at least some of them as an edge in OCI. I think the firms know this and I think if anyone does can a whole class it would have to be a firm that simply has no other choice, and that would be seen as weakness and they will struggle at OCI because nobody wants to join a firm that's on the brink of dissolving.

Thus I find Rayiner's multi-year contraction theory more probable.

In terms of pay decreases, I'm sure some will come and I HOPE they will be accompanied by a fall in billable hours, but they probably won't. However making $125,000 instead of $160,000 doesn't make one 'screwed' just less wealthy.

[Margarets]

So someone would have to step up and can the whole class without knowing that others would follow. And then others might follow, but the remaining firms would be faced with a choice. Either can THEIR whole class, or hang on to at least some of them as an edge in OCI. I think the firms know this and I think if anyone does can a whole class it would have to be a firm that simply has no other choice, and that would be seen as weakness and they will struggle at OCI because nobody wants to join a firm that's on the brink of dissolving.

Sure, but if a market-leader dumped a whole class, I'm almost positive other firms wouldn't hesitate to do so. I guess that's one of the luxuries of being a market-leader... the risk of being a lone-wolf isn't as high.

Same thing with lay-offs. Firms were so gun-shy in the beginning... then Cadwalader dumped their first few, then a few here and there did... then came the Magic Circle Firms, then came... Latham and White and Case... whose decisions seemingly legitimized the notion of laying off associates. This all resulted in today's blood-bath.

Firms don't collude with each other, of course, but as competitors they will try their hardest to match benefits so as to attract the best talent. However, if the best lookin' dude in the room starts coming in with his top pants-button undone, other firms will take that as a sign that they won't look as bad doing the same thing, and take a huge gasp of relief when they unbutton their pants and let their bellies flow forth. Bad analogy, I know, but you get what I'm saying.

[Margarets]

Anyway, I'm definitely not trying to contradict rayiner. What I am trying to say, though, is what I've been told by credible sources. It's a real possibility, and I'm really hoping it doesn't become the reality.

Keep in mind, the dumping of a whole class was mentioned in conjunction with the hiring reduction.

[soullesswonder]

I'm actually betting the floor for market firms will be 130k, not 100k as people have been throwing around. I've been reading a bit about behavioral economics, specifically employee resistance to changes in nominal wages. It appears that many employees at struggling companies would rather have layoffs than receive a pay cut, and that historically companies are reluctant to cut wages. This occurs even in times when the CPI decreases (i.e. a nominal wage cut would have a negligible effect on real wages) Now, given the high cost of Associate salaries I wouldn't bet against a general contraction to 145 (already kinda there) or 130, but after that the associates will probably protest, and given the expense of a legal education, they may be able to prevent further cuts.

Dumping a class or changing hiring numbers seems much more likely than a fall to 100k.

Btw, everyone should go out and read the book "Animal Spirits" immediately. Great book for understanding market processes and some of the psychology behind economic actions.

[dresden doll]

Anyway, I'm definitely not trying to contradict rayiner. What I am trying to say, though, is what I've been told by credible sources. It's a real possibility, and I'm really hoping it doesn't become the reality.

Keep in mind, the dumping of a whole class was mentioned in conjunction with the hiring reduction.

You're depressing me tonight.

[Cleareyes]

Anyway, I'm definitely not trying to contradict rayiner. What I am trying to say, though, is what I've been told by credible sources. It's a real possibility, and I'm really hoping it doesn't become the reality.

Keep in mind, the dumping of a whole class was mentioned in conjunction with the hiring reduction.

The other thing about dumping a class is that it's umm, kind of stupid. I mean you're getting rid of the creme de la creme of the year, and then replacing them with the less delicious cream of the next year? Based purely on when they happened to apply to law school?

That seems like a recipe for getting less bang for your buck then cutting deeply into the bottom (of the top) of a bunch of classes in a row.

[Margarets]

That seems like a recipe for getting less bang for your buck then cutting deeply into the bottom (of the top) of a bunch of classes in a row.

Again, this plan wasn't mentioned to me so much as an either or (either dump the class or hire less), it was presented to me as "let's dump the class AND hire less." Surely that's more cost-effective than doing one or the other.

[Cleareyes]

That seems like a recipe for getting less bang for your buck then cutting deeply into the bottom (of the top) of a bunch of classes in a row.

Again, this plan wasn't mentioned to me so much as an either or (either dump the class or hire less), it was presented to me as "let's dump the class AND hire less." Surely that's more cost-effective than doing one or the other.

Yes, but you can always just spread the damage around and only hire the best of the best for several years rather than dumping a class, including the best, and digging a little deeper than you would have to had you not dumped the best in that class in the following years. I can't say they won't do it because I don't know, but if I were making these decisions the only reason I would consider this is if the company were in such a massive cash crunch that it's better to hire worse workers later than to hire better workers now and have to pay them now.

The whole point of this whole silly system is that these firms are competing for the stars, the best and the brightest people out there, and now the proposed plan is to let some of these amazing specimens (including the very best of them) walk based solely on the year they graduate? I'm not saying they won't do it, I just won't understand the reasoning when they do.

[rayiner]

Anyway, I'm definitely not trying to contradict rayiner. What I am trying to say, though, is what I've been told by credible sources. It's a real possibility, and I'm really hoping it doesn't become the reality.

Keep in mind, the dumping of a whole class was mentioned in conjunction with the hiring reduction.

Feel free to contradict me. I just ran the numbers and figured out they need to dump about a class worth of people. All at once makes as much sense as a bit at a time.

[solo_lawyer]

you sunshine types might wanna read this:

http://www.abajournal.com/news/43k_new_ ... job_market

[solo_lawyer]

aaaand ya might wanna read this one, too:

http://www.abajournal.com/news/texas_la ... found_work

[CE2JD]

NO!!

I AM ENTITLED TO MONEY IF I GET A LAW DEGREE!! WHERE IS MY MONEY???

Law degree = prestige = money, right???



Most people who go to law school are so stupid. They could make more money in a happier environment if they just managed a Burger King or something.

[rayiner]

you sunshine types might wanna read this:

http://www.abajournal.com/news/43k_new_ ... job_market

And? Schools have been graduating about 40k new attorneys each year since 1993. What's the big news? That the economy sucks right now, so all the graduates are in trouble? No duh...

Seriously. This recession is really bad. People considering LS might do well to hold off a year or two. But these sorts of anecdotal articles are less than useless. Yeah, some GULC grads got toasted because their firms went under. What we don't know is what percentage of GULC grads were effected. 1%, 10%, 30%? If you want to influence people's opinions, rather than just engage in scare mongering, post info that people can use to make rational decisions.

Things people on this site really need to know:

1) What do the numbers for 2008 OCI look like? What % of T14/T25 grads got their offers yanked?
2) What are the projections for 2009 OCI? How much is recruiting going to be cut at T14/T25 schools?
3) How are various segments of the legal market faring (real estate/transaction/patent/etc)? What are the recovery projections?

Posting "got unlucky" stories and data about T3/T4 grads is absolutely useless on this site...

[Mr. Matlock]

you sunshine types might wanna read this:

http://www.abajournal.com/news/43k_new_ ... job_market

What about us partly cloudy with a slight chance of showers types? Should I avoid these?

I'm confused, curious, and alone.

[rayiner]

aaaand ya might wanna read this one, too:

http://www.abajournal.com/news/texas_la ... found_work

Considering how people even considering Tier4 schools on this forum get chewed out, I don't really see how this article is relevant...

[dresden doll]

aaaand ya might wanna read this one, too:

http://www.abajournal.com/news/texas_la ... found_work

Considering how people even considering Tier4 schools on this forum get chewed out, I don't really see how this article is relevant...

Just can't give up projection, can he?

[rayiner]

aaaand ya might wanna read this one, too:

http://www.abajournal.com/news/texas_la ... found_work

Considering how people even considering Tier4 schools on this forum get chewed out, I don't really see how this article is relevant...

Just can't give up projection, can he?

I don't get it, frankly. Even before the economy went south, people on this site were saying stuff like "WUSTL gives you a 60-70% chance of financial destruction." This site introduced me to the idea that everything that isn't an NLJ250 job is $35k doing slip-and-falls. TLS has a decidedly conservative and pessimistic bent if anything!

[dresden doll]

aaaand ya might wanna read this one, too:

http://www.abajournal.com/news/texas_la ... found_work

Considering how people even considering Tier4 schools on this forum get chewed out, I don't really see how this article is relevant...

Just can't give up projection, can he?

I don't get it, frankly. Even before the economy went south, people on this site were saying stuff like "WUSTL gives you a 60-70% chance of financial destruction." This site introduced me to the idea that everything that isn't an NLJ250 job is $35k doing slip-and-falls. TLS has a decidedly conservative and pessimistic bent if anything!

Agreed. There's a few somewhat overtly optimistic posters around here, but by and large, TLS is pretty conservative when it comes to assessing chances of success out of particular schools. I constantly read posts from people sighing and wringing their hands over how delusional we all are, but I rarely encounter a truly delusional poster on the board.