Although corporate activity has retrenched from record highs in 2021, the Chicago legal economy and attorney job market remain robust, underscoring the variance between the strong labor market and the challenges of high inflation and a volatile stock market.
2021 Was a Record Year for Chicago Lateral Attorney Hiring
Like other major markets, Chicago experienced unprecedented law firm lateral attorney hiring during the 2021 economic recovery. The surge of transactional work stretched the attorney benches of leading large and midsize law firms in Chicago, the third-largest legal economy in the U.S. Corporate, lending, and real estate transactions significantly outpaced the number of available attorneys (mainly associates) needed to handle the matters. M&A deals reached record highs in 2021—especially private equity-related transactions. Notably, Chicago’s Kirkland & Ellis led all firms globally in 2021 as the top dealmaker advising companies on M&A transactions totaling over $443 billion.[1] Similarly, litigation saw an uptick in attorney hiring as courts worked through an extensive backlog of cases that were on hold during the pandemic.
The top Am Law-ranked, regional, and midsize law firms in Chicago hired a whopping 1,586 lateral attorneys between January 1, 2021, and December 31, 2021 (1,103 associates, 311 partners, and 172 counsels).[2] This was a 70% increase over the 933 Chicago lateral attorneys hired in 2020. Markedly, associate hiring increased by 94%, to 569 associates. Compared to the pre-pandemic economy, 2021 Chicago law firm lateral attorney hiring was 57% greater than the five-year average of lateral attorneys hired between 2015 and 2019, when firms hired an average of 1,011 lateral attorneys annually. The difference is even starker when comparing associates only: Chicago lateral associate hiring in 2021 was 78% higher than the five-year average between 2015 and 2019. The leading practice areas driving the 2021 hiring boom were corporate (M&A, capital markets, and fund formation), finance, litigation, real estate, and IP (litigation and prosecution).
Sustained Hiring Strength in 2022
Turning to 2022, M&A and other corporate transactions have slowed down from last year, but corporate activity has not fully retreated. Rather, it has returned to pre-pandemic levels, which were still high by historical standards. For the time being, the Chicago legal economy and lateral attorney hiring continue to perform strongly. In the first half of 2022, there were 805 lateral attorneys hired by top Am Law-ranked, regional, and midsize law firms in Chicago. This is actually ahead of the pace of Chicago lateral attorney hiring during the same period in 2021. Notably, lateral hiring increased in the second quarter of 2022 (451 hires), compared to the first quarter (354 hires).
Core transactional practices continue to drive the Chicago legal economy, including large cap and upper middle-market private equity M&A and fund formation, strategic M&A, commercial finance, and real estate transactions. In the first half of 2022, Chicago firms hired 201 corporate and finance lateral attorneys, which was an increase from the 163 hires in the first half of 2021. Real estate had 66 lateral attorney hires in the first half of 2022, as compared to 43 hires during this period in 2021. One impact of financial market volatility and other economic factors on corporate practice groups in Chicago and globally is a slowdown in capital markets. Equity offerings have sharply declined with U.S. IPO volume down 95% from this point last year, but the majority of Chicago capital markets practices are debt focused. While debt issuance has decreased, it has generally retrenched to pre-pandemic levels.
Leading Chicago commercial litigation and white-collar investigations practice groups have also maintained a busy pace in 2022, with strength in class action, securities, antitrust, FCPA, False Claims Act, and products liability cases. Breach of contract matters have also increased, with an uptick in COVID-related business and supply chain disruption disputes. There were 320 litigation lateral attorney hires in Chicago in the first half of 2022, an increase from 271 hires in the first half of 2021. IP associate hiring has grown substantially, with particular demand for associates with pharmaceutical, biotech, electrical engineering, and computer science degrees. As a major tech company and startup hub, Chicago is seeing an increase in tech transactions (licensing, software, and joint ventures), data privacy, and cybersecurity associate positions. Chicago law firms hired 75 IP lateral attorneys in the first half of 2022, as compared to 58 IP lateral attorneys in the first half of 2021. We have also recently seen more associate openings in restructuring practice groups, though not at the high levels that typically accompany a recession.
Before the pandemic, there was a sustained deficit of midlevel corporate, finance, real estate, and IP associates due to insufficient hiring in these areas through summer associate programs in earlier years. Further, the limited number of law students matriculating with the most desirable engineering and life science degrees has always driven IP associate shortages. Early 2020 COVID-related hiring freezes and layoffs further compounded these associate scarcities, pushing firms to their absolute maximum work capacity in 2021 and continuing into 2022. Chicago lateral attorney hiring persistence correlates with strong national job growth in the legal sector, which in June added “35,200 more jobs than in June of 2021,”[3] as reported in the ABA Journal. The sector has grown to a total of 1,185,600 jobs, exceeding the record highs prior to the Great Recession.[4] However, we could potentially see more of an impact from the economy on hiring in the coming months—decreases in corporate legal work typically lag a few months behind actual reduction in corporate activity.
We are still seeing new associate positions open daily and are currently working on a range of posted and unposted associate searches in these and other practice areas with prominent large and midsize firms in Chicago.
With increased lateral associate demand in 2021, we saw significant compensation increases at Chicago law firms. Currently, most of the top Chicago Am Law 100 firms have adopted the Cravath market-level base and bonus scales. There are, however, many firms in Chicago with lower compensation scales, thereby creating major associate income disparities. Many large Am Law-ranked Chicago firms remain on the 2021 market base salary scale with at or below market bonuses. Some firms are even below last year’s market compensation scales. This can create large income disparities between associates, in some cases reaching as high as six figures. The potential for a substantial compensation increase creates a strong incentive for associates to lateral. Signing bonuses for associates in high-demand practice areas are still common, though somewhat less frequent than in 2021. On the return-to-office front, most firms have now implemented a 2–3 day per week in-office policy. Firms are generally moving away from fully remote positions, but many transactional practice groups are still offering these roles, which are particularly attractive to associates earning Cravath-level salaries and bonuses while living in lower-cost cities.
Chicago also continues to be an attractive market for law firm expansion, with many firms opening new Chicago offices in the past few years. Most recently, Norton Rose Fulbright launched their Chicago office in April 2022 and now has 16 attorneys with capabilities in tech transactions, data privacy, litigation, labor and employment, and energy transactions.
We anticipate steady continued lateral attorney hiring in the near term in Chicago. If you are an attorney considering a lateral move in Chicago or elsewhere, having a local recruiter who is dedicated to the specific market is critical. At Lateral Link, we are both a leading international search firm and a team of expert recruiters individually dedicated to specific cities and regions. Our recruiters effectively leverage their local market intelligence and strong firm relationships to facilitate a successful lateral search and interview process.
[1] Kirkland Passes Wachtell as Big Law’s Top Global Dealmaker (1), Bloomberg Law, January 6, 2022, https://news.bloomberglaw.com/business-and-practice/kirkland-bests-wachtell-for-top-dealmaker-spot-among-law-firms
[2] All the statistics cited in this post, except as specifically noted otherwise, are from the Leopard Solutions database. Not all firms may report data, and there may also be a delay in reporting.
[3] Legal jobs continued upward climb in June; sector adds 92,300 jobs since pandemic low July 8, 2022, ABA Journal, Debra Cassens Weiss July 8, 2022, https://www.abajournal.com/web/article/legal-jobs-continued-upward-climb-in-june-adding-92300-jobs-since-pandemic-low
[4] Number of U.S. legal jobs now exceeds pre-Great Recession record high, Reuters, Sara Merken, July 8, 2022, https://www.reuters.com/legal/legalindustry/number-us-legal-jobs-now-exceeds-pre-great-recession-record-high-2022-07-08/
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