The 6-12 month lag between any upswing in the economy and the flow on to jobs for lawyers means Australian law firms are unlikely to be resuming normal hiring practices until 2010 – at the earliest.
With the global recession forcing law firms to focus on liquidity, any cash flow that results from a potential upswing in the economic cycle will not see its way to hiring managers for 6-12 months according to industry sources. That would put any recovery in the Australian job market for experienced lawyers on the back burner until at least 2010.
Chris Lowe, head of Watson, Farley & Williams’ Singapore office said that the perception of there being a lag between the real economy and its impact on law firms is absolutely accurate and often comes down to liquidity working its way through the system. “Generally speaking, I think you can say there is definitely a time lag for any eventual upswing,” he said. “There will be at least a 6-12 month lag before cash and/or capital is available within the firms to bring in the extra lawyers required to match the increase in demand.”
Australian firms do not have the need to replace mid-to-senior level lawyers as they continue to enjoy low attrition rates due to the depressed markets in the UK and US. This has meant firms have been able to pick and choose from the cream of the crop as the decline in work overseas has meant less lawyers moving abroad and more repatriating as jobs abroad dry up.
Director of Burgess Paluch Legal Recruitment Doron Paluch said the first sign of an excess supply of lawyers was evident at the start of 2008 with the flow-on effect impacting Australia by the end of the year. Since then, firms have implemented a number of measures including hiring freezes or selective recruitment. With the global economy first showing signs of strain in mid-2007, this demonstrates that the lag works on the way down as well as the way up.
However, Paluch has noticed a recent bottoming out in the decline in the job market and said that now it is just a question of when the upturn will eventuate. “I’m fairly certain we’ve hit the bottom. I don’t know how long the bottom’s going to last but we are predicting that by early 2010 there will be a significant upturn in the job market” he said.
The legal market has always lagged behind the real economy as existing projects filter through the system before they begin to impact the workloads of individual firms. Freehills Director of people and development Gareth Bennett disagreed with Lowe’s analysis of a 6-12 month lag saying it was only two to three months coming into the recession and is likely to be the same coming out of it.
“Attrition rates have dropped for the past month or two but they’re starting to bottom out – it comes back to confidence in the market,” he said. “I think people’s overall confidence has been shaken and they’ll want to see a sustained period of stability before making those big career changing decisions again.”
Bennett said that, even if money flows back into they system and activity levels increase, it will only take a small amount of bad news to surface for confidence to dry up again. Until lawyers are confident that the worst of the recession is over and that the UK and US markets are stable again, they will be reluctant to make the move overseas.
“I think we’ll see some oscillations for a while as confidence ebbs and flows before people start to feel it's worth seriously getting back in the market,” he said. “Things like going abroad for a couple of years [are put on hold] - people would like to see that things have stabilised, that the UK has got its recession under control, and that the London market has picked up again. It’s probably something that we’re all waiting and watching out for.”
When pressed for a best idea of when normal recruiting practices would return, Bennett was reluctant to commit. “All the best indicators at the moment are talking about probably a year’s time but it is asking how long a piece of string is,” he said. “One thing worth mentioning is that we went into the recession very fast and we could come out of it just as quickly and we have to be positioned and ready to take advantage of that upswing when it occurs.”
Helen Mckenzie, deputy managing partner at Blake Dawson, said that a return to high attrition levels will prompt law firms into action on their own recruitment drives. Hiring managers across all firms are monitoring the situation closely paying careful attention to trends reported in media, tracking recruitment websites and using their network of contacts domestically and overseas to spot any upswing in the labour market.
Middletons HR director Tracey McDonald told ALB that recruitment activity has been slow in the last couple of years and that it is unlikely to change for the remainder of 2009. “Beyond 2009 is anyone’s guess as to what will happen but it seems self evident that a sustainable increase in activity will be needed before we see a noticeable increase in recruitment activity,” she said.
Those lawyers hoping for a fast return to the glory days of headhunters knocking down their door offering mind-boggling salaries and incentives will have to bide their time at least a little longer. Having been burnt by the unprecedented collapse in global commerce, it is apparent that hiring managers in firms across the country are letting caution rule and it will take a significant demonstration that the global economy has fully recovered before aggressive recruitment strategies are once more employed.