As I briefly discussed back in April, prior to their current respective roles as co-host of Thinking Like a Lawyer and host of The Jabot podcasts, I joined Joe Patrice and Kathryn Rubio as the host of our own podcast entitled Recess Appointment. Not surprising for a show that first aired in the midst of the 2012 presidential election, especially when our unofficial tagline was “four liberals agreeing,” we spent a lot of time discussing the economy. Despite discussing economic matters for more than a year, I am hesitant to claim any sort of expertise in the field, especially since the bulk of my contribution on the topic was regurgitating points that Justin Wolfers had tweeted. But while I am not going to be teaching in Vanderbilt’s Law & Economic Ph.D. program any time soon, I can still look at the below chart from Deutsche Bank, courtesy of the New York Times’ Ben Casselman, and understand it is not painting a rosy picture of the American economy in the near future.
Indeed, it might have been Pete Campbell himself who best summed up how some economic indicators are currently looking
(Image via Giphy)
The bearish economic view is not merely reflected in viral tweets and memes. As recently reported in The American Lawyer, McDermott Will & Emery is expanding the ranks of its restructuring and insolvency group not in anticipation of a future recession, but to deal with the recession that “‘we’re at the beginnings of . . . right now.’” A recession that is either already upon us or just waiting off stage should not be too surprising given that the United States is currently in the midst of its longest period of economic expansion in its history. At some point, the economic cycle will have to shift to a contraction stage, as is the case with every other national economy — Australia serving as the bizarre exception, having now entered its 27th consecutive year of economic growth.
Talk of an economic downturn can spook those in the legal world old enough to have lived through the Great Recession. My personal recollections are a bit skewed as I always seem to straddle generational lines. Born in 1980, I am either a member of Generation X or a Millennial, depending on which article I read, see, e.g., Pew vs. NPR — though I personally reject either classification, preferring instead the Oregon Trail microgeneration label (please never say the word Xennial within 100 feet of me): played Oregon Trail in elementary school; got online with AOL in middle/high school; experienced the joys of Napster in college; and never had to deal with social media until a full-fledged adult? Check, check (it was actually Prodigy), check, and check.
Similarly, as someone who graduated from law school in 2008, I managed to just avoid being a part of the Lost Generation. 2L OCI at NYU in Fall 2006 could best be described as being a fat kid set loose in a candy store after hours and as I have been telling my 1L students over the last several weeks, while I cannot provide a first hand account of what it is like to be a Biglaw Summer Associate in 2019 or 2020, I can tell you what it was like in 2007 and the short description would be “great.” But my friends and classmates who graduated with me were soon enveloped by the tsunami that was washing ashore the legal industry. I spent 2008-09 clerking and thus was able to witness the bloodshed from the safety of my Article III bubble. Whether texting with those close to me and hearing about hallways of people who were working one day and gone the next, or reading on this website about firms I interviewed with two years prior going under, it was a surreal period. To this day, it remains jarring to see a firm whose offices during the Great Recession would best be described as an abattoir sit nearly at the top of the Am Law 100.
(Image via Frinkiac)
If a recession is truly in the offing, what can law students be doing now to help ensure they do not become a downturn statistic? First and foremost, do not panic. The reasons for this are twofold: First, it is highly unlikely that the American economy will fall to the depths of what we experienced during the Great Recession. Once in a century events tend not to happen every decade or so, unless we are talking about extreme weather calamities being spurred by climate change. Then again, it typically takes a steady hand to negotiate the country through trying economic times, and I would not call the hand that penned this letter particularly steady.
While the macroeconomic environment is not likely to be as dire as was seen a decade ago, the same is true for the piece of the American economy that is the legal industry. The good news is that those who are now running private law firms were almost assuredly in practice during the Great Recession and have no desire to live through that horror show again. Thus, many employers are being proactive. During the course of this “Fall” Recruiting Cycle, I have noticed numerous Biglaw firms hiring summer associate classes that are markedly smaller than what had been seen in years past. While non-economic reasons are often given, when you dig a bit deeper, it becomes quickly evident that a lot of firms are trying to become as lean as possible, and thus have pared back their hiring. It is far easier to hire more junior associates as laterals if the economy does not go south than it is to deal with a triple-digit class of first-year associates for whom there is no work. Truth be told, paying out year-long sabbaticals can get pretty expensive.
Second, do your diligence on employer finances. During my aforementioned great summer associate experience of 2007, I remember a presentation in which the gathered summers were told, among other facts about Sidley, that the firm carried no debt. At the time, that did not seem to be a trivial detail. A year later, it became VERY important. Making sure that your employer is on stable financial footing can help ensure you do not have to familiarize yourself with the particulars of the WARN Act. While some of this information is available online, not surprisingly, financial information can be kept close to the chest. The best way to pry it loose is also the simplest, ask. This is not to say that students should begin OCI interviews demanding to see accounting documents, but especially when you get to the offer stage, inquire about finances. If the employer is financially secure, they will want to share that information in the hopes it will positively distinguish them from the competition; if the employer is being strangely secretive or not forthcoming, that’s typically a sign. Furthermore, look for employers who are willing to zig while everyone is zagging during times of economic peril. It is a pretty good sign if a firm is able to open offices during the Great Recession and have them remaining open more than a decade hence.
Finally, consider some recession proof, or at least resistant, employment options. As mentioned above, I spent the early portion of the Great Recession in a federal clerkship. While I have previously written why I think clerkships are a fantastic opportunity regardless of the economic climate, they can be especially valuable in recessionary times. A big benefit of working for someone whose job is guaranteed by the U.S. Constitution is that they are unlikely to lose their position, regardless of how the economy is faring, and those with life tenure would not be too jazzed about the idea of losing their clerks. Plus, legal layoffs often abide by the same principle found in the business world, “last one in, first one out.” This can rob students of their chance at gaining some experience and developing their skills. It is also why so many 2008/09 law school graduates had issues finding their second job if they were fired within the first year of their employment. Hard to have a year’s worth of legal experience if you got fired within the first couple of months for economic reasons outside your control. Clerking for a year gives a newly graduated student at least a year reprieve from the economically depressed job search. Plus, said student will be considered an “experienced” attorney by the end of the clerkship, opening up an array of lateral associate opportunities as well as some governmental opportunities like the Department of Justice Honors program.
Whether or not it is already here, a U.S. recession is almost assuredly inevitable. While the legal employment scars from the Great Depression have not yet fully healed, it is unlikely that the industry will be dealt such a devastating blow the next time around. But this more mild prediction is not a substitute for law students taking action to protect themselves from becoming “Lathamed” the next time around.
Nicholas Alexiou is the Director of LL.M. and Alumni Advising as well as the Associate Director of Career Services at Vanderbilt University Law School. He will, hopefully, respond to your emails at abovethelawcso@gmail.com.