The national unemployment rate for lawyers in 2011 was 2.1 percent, and the median salary for that group that year was $113,310. Fat City, right?

Not exactly. A lot of things going on in that sector since the Bureau of Labor Statistics reported those figures have conspired to keep debt-laden law school grads out of the work force—unless they’re waiting tables. At the same time, the nation’s law firms are staffed with lawyers who are far grayer as a group than were their counterparts a bit more than a generation ago. When they retire en masse, the industry will not be well-served by replacements who know more about mopping up at a fast-food restaurant than they do about drawing up a franchise agreement for one.

To be sure, there are signs that the disconnect between law school graduation rates and available jobs is beginning to moderate. There’s still a way to go, though, to correct what is decidedly a buyer’s market in terms of legal labor.

The employment scene in the legal field is one of the more interesting story lines in the professional services realm, which includes accounting, consulting and other services that provide key support for business owners and executives. Another is the relative time of plenty on the accounting side, where five years of regulatory binging in Washington have resulted in something not unlike an Accountancy Full-Employment Act.

So while the long-term earning power of attorneys is considerably greater than that of accountants, at least among the newest members of the work force, the young number-crunchers at present have the upper hand.

“There’s a bit of a supply and demand issue right now” for accounting services, said Terry Putney of Transition Advisors, an Overland Park consultant to accounting firm owners and executives. “Demand is up recently, but the supply hasn’t increased.” In fact, when Putney addressed fifth-year accounting students at the University of Kansas last fall, he asked how many of them had job offers in place. “One hundred percent already had jobs lined up—and this was last November,” fully six months before graduation, Putney said.

As a consequence of that demand, the unemployment rate in the profession is extremely low, roughly 3.5 percent—less than half the overall national rate. “There was good, organic growth in the profession last year, around 8 percent, and that’s unheard of in this economy,” Putney said. “It’s not predicted to stay at that rate; that would be unsustainable even in a good economy.”

Legal Concerns

Compare that development with the legal side, where those graduating with law degrees at many programs across the country have run into an unemployment buzzsaw over the past few years. The wave of law school admissions nationwide pushed 45,000 new graduates into the market last year, up 5 percent from 2011.

But among those, nearly one in five was unable to secure any form of employment upon graduation, and nearly half—44 percent—failed to find long-term, full-time jobs that required them to pass the bar exam, according the American Bar Association.

The trends at work with employment numbers are also reflected in compensation levels. According to the American Institute of CPAs, starting salaries of accounting graduates rose to $47,800 last year. That was up 2.8 percent from the 2011 median, and represented a 12 percent premium over starting salaries for college graduates overall. And the demand is likely to continue; the organization anticipates a need for 16 percent more accountants and auditors by 2020, increasing overall employment projections to 1.41 million jobs.

In the legal profession, by contrast, starting salaries fell nearly 17 percent, from $72,000 to $60,000, in just the two years leading up to 2011. What’s happening with college graduates is but one end of a whipsaw effect with long-term consequences for the legal profession. At the other are the astonishing demographic changes within the profession.

ABA statistics show that in 1980, those younger than 35 accounted for 34 percent of all lawyers in the U.S.; today, that figure has fallen to 13 percent; meanwhile, the share of lawyers 55 and older rose from 25 percent to 34 percent, and the median age increased by a full decade, from 39 to 49.

Home-Grown vs. National

Beyond the obvious differences of the services they provide, the legal and accounting professions in Kansas City are completely different animals in terms of ownership. Law firms are considerably more local in nature, while accounting firms are dominated by outside-of-market ownership. Of the 10 largest law firms operating here, nine are headquartered in Kansas City, and 20 of the 25 biggest are home-grown. Within the ranks of those 25 are more than 1,700 attorneys, nearly 88 percent of whom work for the locally-based firms.

Compare that with the Top 25 accounting firms, which had nearly identical numbers of CPAs in their ranks last year—about 1,700— but only a third of whom worked for locally-based firms. Even counting as locals the Springfield-based BKD and Mayer Hoffman McCann, an organizational affiliate of Cleveland-based CBIZ, the national Big Four firms accounted for nearly 43 percent of the area-wide CPA total.

As with the Big Four, regional players like BKD are looking over the horizon to fill their accounting rosters.

Amy Ackerson, national recruiting director, said that while the firm will go after skilled, experienced professionals, it focuses on building a foundation with fresh hires. BKD has a long history, she said, of working with universities to ensure that its college recruitment efforts are fully engaged. “That’s the majority of how we grow and build our staff, then promote from within,” Ackerson said. “We hire at the entry level with the intent to retain enough to fill positions as partners retire, and address regular turnover along the way.”

The ability to get those newly-minted graduates on board quickly is key, she said, and not just with BKD.

“As you look across the public accounting industry, all of the major firms have campus recruiting machines down to science,” Ackerman said. “They’re big, well-oiled machines, and because of the way we attack at the entry level, very few people get two, three or four years into their career and decide they want to change firms. They’ve already had a chance to explore the big firms through the college recruiting process, and at that point, why switch? They’ll either stay at the firm or leave public accounting altogether.”

The Campus Connection

With the ongoing crunch in legal employment, law-school admissions have fallen sharply over the past two years.
But that trend was bucked big-time in Lawrence: Last fall, the University of Kansas School of Law saw a 19 percent increase in applicants for the incoming 2012 class. Only 11 ABA-accredited schools—out of nearly 200 nationwide—posted increases of at least 10 percent in applications last year, and KU was one of them. Nationwide, applications declined 14 percent.

Steve Freedman, assistant dean for admissions at KU, said the trend-countering power of the program was tied to several factors: Affordability, compared with colleges around the country; a Midwestern reputation for the quality of the degree (U.S. News ranks KU 86th among law schools, not far behind the University of Missouri at No. 76); and the national reputation Lawrence has as a college town.

As a result, KU has been able to post increases in the numbers of graduates who find work, Freedman said. “The problem is, the number of graduates has continued to stay high” nationwide, he said. “Now, we’re seeing shrinking levels—jobs are increasing, graduate numbers are decreasing.” That, too, is part of a national trend. KU cut its class size from 168 in 2010 to 120 this year.

But for law firms, “It’s still a buyer’s market,” he said. “We are seeing firms hiring, and our numbers are better this year.

“These aren’t boom times,” Freedman said, “but they are getting better.”

The other law school in the metropolitan area, at the University of Missouri–Kansas City, has also scaled back on admissions. “We had been around 170 eight or nine years ago, but we saw there was weakness in the legal economy coming, so got down to 150 as our target about three years ago,” said Ellen Suni, dean of the law school. “This year, we started by thinking we probably shouldn’t take that many, but with the craziness in the admissions pool, we decided that rather than pick a number, we were going to admit students we want to have.”

An aggressive marketing effort and a summer-start program have helped drive numbers, with 14 percent more second-seat deposits this year, she said, and “If you apply our normal yield to those numbers, that would give us a class of 145 or so.”

Suni has been in legal education long enough to recall the true peak of law-school interest, and it swamped what other educators consider the recent peak from 2010. “It’s been a little while since the real peak, way back in what many of us call the LA Law blip,” from the 1980s TV series. From as many as 1,300 applications a year in that period, the interest fell below 1,000 in 2010, then 885 in 2011 and 719 last year.

Interestingly, she notes, while the law school and the Bloch School of Management might have competed for many of the same students in the past, she doesn’t think that’s entirely the case today.

“It was more true in the past, because I think that law schools often got a significant part of their population, not the majority, but a real chunk of the population, from mostly non-science and math graduates who knew they wanted to do advanced degrees, but had no idea of what they wanted to do with them.”

Law school and business school, she said, used to be viewed as ways that students could increase their career options, so, “In that respect, yes, we were more in competition. We never treated it that way, but that was the reality.

Today, Suni said, “with the focus on debt and whether it’s worth getting that degree and what you’ll owe and all that, I think that’s the group of students who have most disappeared from the applicant pool. There is less competition in some respects, but we’re seeing that more students, or prospective students, who are looking at law school and applying have already chosen careers in law.”

 

 

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