2022 saw a pullback in lateral attorney hiring, as inflation and high interest rates slowed corporate and lending activity, and as law firms found themselves overstaffed after record hiring in 2021. Unfortunately, we have also seen recent associate layoffs, mainly by firms particularly dependent on the currently beleaguered tech sector. Despite these developments, overall lateral attorney hiring levels are currently more reflective of pre-pandemic lateral attorney hiring than a full-fledged recession.
Certain practices and industry sectors have featured continued demand for mid- through senior-level associates, counsel, and partner-level attorneys. As we enter 2023, depending on the length of the economic slowdown and whether inflationary pressures subside, we would ideally see a continuation of current lateral attorney hiring levels followed by an uptick later in the year, tracking a resurgence in business activity.
2022 Lateral Hiring Trends Compared to Previous Years
With 2021’s economic recovery spurring exorbitant deal-flow, associate hiring increased to historically high levels, especially in transactional practice areas. In 2022, there was a 20% year-over-year decrease in lateral associate hiring by Am Law 200 firms, with 8,116 total hires compared to 10,179 hires in 2021. In the second half of the year, as the economic slowdown became more evident, there was a 45% year-over-year decrease in Am Law 200 associate hiring versus 2021.
While the 2022 decrease in Am Law 200 law firm associate hiring was substantial compared to the aberrational hiring levels during the same time period in 2021, when putting these numbers into historical context, 2022 associate hiring levels were consistent with those in the years preceding the pandemic when the economy was relatively healthy. Am Law 200 associate hiring in the second half of 2022 was 7% higher than the five-year average for the same period during the pre-pandemic years of 2015 through 2019. Mirroring the resilience of the broader labor market, the lateral attorney hiring market endures, although practice area demand has adjusted due to distress in certain segments of the economy.
Corporate Transactions, Finance, and Real Estate
The economic challenges of 2022 have had the most impact on corporate transactional practice areas. There was a precipitous decline in deal activity in 2022, including a fall in strategic M&A and capital markets offerings due to interest rate increases and market volatility. 2022 had the lowest Q4 global M&A deal volume in the last six years. Even so, private equity-backed M&A remained steady, with PE leveraged buyouts notching their second-busiest year in a decade. Deal activity was driven by PE firms holding record levels of committed capital (“dry powder”), attractive target company pricing, and private debt fund financing.
These market developments are reflected in 2022 lateral attorney hiring and in current demand. We are seeing very few mid-level M&A associate openings in public company and strategic M&A-centric corporate practice groups. However, we still see consistent openings for mid-level private equity M&A associates with corporate practice groups representing large-cap and upper middle market PE sponsors.
Associates experiencing a slowdown in non-PE M&A corporate practice groups may wish to explore such PE M&A associate positions, as strategic M&A primary and ancillary document drafting experience is directly transferable. Capital markets and securities associate hiring has diminished substantially more than M&A, with very few openings nationally. Due to rising interest rates, stock market volatility, and lending costs, the IPO and global debt offerings markets collapsed to historic lows in 2022. While we have not yet seen many publicly acknowledged layoffs of corporate M&A or securities associates, there were reports of stealth layoffs during this past review season.
Tech and emerging companies and venture capital (ECVC) corporate practice groups were perhaps the most detrimentally impacted by the global economic downturn in 2022. Rising interest rates and borrowing costs, lower stock prices, geopolitical tensions, and other factors have halted tech company expansion, spurred austerity measures, and caused VC funding to fall to pandemic period lows. Over the past two quarters, the decrease in demand for tech company legal guidance has led to associate and staff layoffs in practice groups servicing tech companies and VC sponsors. Associates affected by these layoffs may look to transition into other corporate practice areas in which their core corporate transactional experience would be transferable.
While on a smaller scale than in 2021, we are still seeing demand for mid- through senior-level commercial finance associates. As leveraged finance transactions by investment banks have retrenched, private equity firms have increasingly turned to the private credit market to finance acquisitions, thereby providing a steady deal-flow for certain commercial lending practice groups. There have also been recent lateral associate structured finance and securitization openings, though demand has decreased significantly since 2021 due to slow growth and higher interest rates.
Investment funds groups are still hiring relatively actively, with openings for associates across all levels. While private equity, venture capital, and other fundraising slowed significantly in 2022, certain sectors have remained busy. Real estate fundraising slowed while investment in infrastructure and energy funds remained active relative to previous years. Further, although private equity firms and other sponsors are taking longer to raise capital in the current environment, that does not substantially decrease the amount of legal structuring or regulatory guidance needed for active fund management. Because fewer associates have funds training, relative to other corporate specialties, many investment funds practice groups are short of talent.
In real estate, we are still seeing demand for mid- through senior-level lateral associates, with steady commercial deal activity and some high-performing asset classes. For example, in Q3 2022, although commercial real estate deal activity was down compared to the same quarter in 2021, deal activity was 6% higher than in Q3 2019. Transactions involving industrial property have been particularly active due to the continued growth of e-commerce and inventory surpluses from supply chain constraints.
Litigation is less sensitive to recessions and decreased corporate activity, exhibiting reduced but stable demand for lateral associates this past year. Litigation was the second-best performing practice area in 2022, with midsize firms seeing a slight uptick in litigation demand and many experts predicting an uptick in M&A disputes for 2023. We are seeing litigation lateral associate positions fairly evenly divided between: (1) general commercial and tort litigation (breach of contract, products liability related class actions); and (2) white collar criminal (particularly False Claims Act-focused) and other securities and antitrust litigation.
Litigation practice leaders are anticipating increased government enforcement in 2023, with a quicker pace of proceedings following two years of the Biden administration adding personnel and instituting new policy directives. Law firm practice leaders and plaintiffs’ attorneys are also anticipating increased consumer privacy class action activity, with large tech companies recently having agreed to substantial public consumer class action settlements.
Intellectual property litigation has remained busy, and firms have significantly invested in partner and associate hiring, banking on IP as a practice that is less elastic to economic conditions. Courts are seeing an influx of patent cases that built up during the pandemic. In addition to litigation involving the more commonly disputed technologies, such as software, semiconductors, and electronic devices, new technologies such as artificial intelligence, autonomous vehicles, and battery technologies are emerging in patent disputes.
Given the scarcity of IP associates with the requisite engineering backgrounds, we have seen continued patent prosecution lateral associate positions, though in much lower volume than IP litigation openings. Global patent filings have seen a significant decrease over the past year due to the economic slowdown, with companies seeking to avoid patent filing costs and maintenance fees.
With respect to life science patents, we are seeing associate openings in both prosecution and litigation. Biotech, pharmaceutical, and healthcare companies have continued filing patents and were bolstered by some pandemic-derived technologies, including developments in vaccines, immunology, and telemedicine.
Countercyclical Practice Areas: Restructuring and Labor & Employment
While we have seen an uptick in restructuring associate positions, openings have not risen to the level we typically see during major economic downturns. There were a significant number of corporate bankruptcy filings in 2022, but Chapter 11 filings have remained slow since 2021. Prior to 2022, government stimulus programs, low borrowing rates, and high debt forbearance contributed to the corporate bankruptcy filing slowdown by assisting distressed companies. As these protections dissipate, law firms are fielding more inquiries from clients of over-leveraged companies. Crypto, life sciences, and healthcare are primary sectors currently driving restructuring.
Labor and employment is another hallmark countercyclical practice area, as layoffs and other workforce changes can drive increased employment litigation. There is particularly strong demand for associates experienced in wage and hour class and collective actions as well as discrimination cases.
While the lateral attorney job market is broadly experiencing a slowdown, certain practice areas have persistent need for top associate talent. Should the economy achieve a soft landing, we hope to see the reemergence of transactional practice area hiring in 2023.