How the Job Market for Law School Grads Crumbled (and How It Could Come Back to Life)

Young people are abandoning the idea of getting a legal degree. As a result, there might just be enough jobs around for the students who actually do.

Last week, it was reported that law school applications were on pace to hit a 30-year low, a dramatic turn of events that could leave campuses with about 24 percent fewer students than in 2010. Young adults, it seems, have fully absorbed the wretched state of the legal job market.

And hallelujah to that. The last thing the economy needs is thousands of additional J.D.s sitting around with no work and $125,000 of grad-school debt hovering over them.* But just as importantly, if the coming correction is as big as some are predicting, there's a chance that the hiring environment for new law school graduates could return to sanity within the next few years.

A small chance, at least.

There was a time that graduating from law school meant that you had a fairly sure shot of landing gainful employment as an attorney. No longer. Since the recession, the fraction of new J.D.s finding a full-time job requiring a state bar license withered from roughly 74 percent down to less than 60 percent. That tumble is depicted in the chart below, which compares how the classes of 2007 and 2011 fared on the job market, based on data compiled by the National Association for Legal Placement. 

Note that the fraction of new JDs without jobs or working part-time more than doubled to a combined 22 percent. That's plain brutal.  


To be fair, more than half of those part-timers are at least technically working as lawyers. But many are likely "contract lawyers," who are hired to sit in front of a computer and review vast document caches for as low as $25 an hour. These luckless young folks are supposed to spend less than a minute staring at each PDF before marking it "relevant" or "not relevant," and there's now software available that can do the work better than most humans. It's a pretty soul-sucking gig, and often a career dead end.

So what, precisely, killed the J.D. job market? When the financial industry melted down in 2008, it burned a hole straight through the finances of America's big corporate law firms. They in turn cut back on hiring, and that destabilized the rest of the market, as graduates who would have landed a plumb firm job opted for lower-paying positions in government, small firms, and public interest that in past years would have gone to the alums of less prestigious institutions. As shown in the graph below, also from NALP data, about 80 of the hiring cutbacks were at firms -- and, if you dig a little deeper, most of those were concentrated specifically at firms with 100 or more lawyers. Outside of private practice, actually hiring edged up.


But here's the key thing: while the number of law grads without work more than doubled, the number that did land jobs stayed relatively even -- 37,123 in 2007 vs. 35,653 in 2011. So why did unemployment grow so much? Because more people were graduating law school in 2011 than four years earlier. And that brings us to why there might be a little ray of hope for this year's law school applicants. 

It involves a tiny bit of high school math and a tiny bit of optimism. As the National Law Journal reported, law schools are on pace to receive about 54,000 applications, which would lead to about 40,000 students on campus come Fall. Looking over past years admissions and graduation statistics, I think it's fair to ballpark the national law school attrition rate for the last couple years somewhere between 10 and 15 percent. Applying the conservative 10 percent figure, that might mean just 36,000 law students will graduate in 2016, down from a full 44,495 in 2011.** In short, the number of new JDs would roughly match the number of jobs that were available to even the unluckiest law school class in recent history. They wouldn't all necessarily be very good jobs (again, consider the contract lawyer), but they'd be jobs nonetheless.

That's the math. Now about the need for optimism. Big law firms seem to have stabilized themselves, but the calm might only be temporary. Their business model is still in a fair amount of danger, under siege by innovative, lower-cost companies that market basic corporate legal services on the cheap as well as technology that threatens to undercut the need for associates, and along with them an important source of profits. As firms struggle their way towards sustainable growth, some may well cut down their hiring even further. And if they do, the effects will be felt all over the legal job market, just as they have been for the past couple years. Call it trickle down unemployment.

So here's the deal, class of 2016: You're okay if law firms stop shrinking. You might not be okay if they don't.


* That's the average a student has to borrow for a private law degree. Compare that to the roughly $36,000 of debt undergrads rack up for a private B.A. 

** A quick note for those paying extra careful attention to the numbers in this piece: NALP's survey data only tracks about 95 percent of law school graduates. So if you add up the number of jobs and subtract it from the raw number of new JDs in 2011, it would suggest the unemployment problem should be much worse than the graphs indicate. And who knows: it might be! But we don't have the data to know for sure.