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Strange data from law firms regarding drops in “demand” for legal services in late 2008

“Overall demand for legal services dropped sharply in the fourth quarter of 2008, causing a further decline in law firm productivity. Firms participating in Hildebrandt’s Peer Monitor® reported Q4 negative demand growth of -6.6 percent, compared to Q4 2007, and negative productivity growth of -10.4 percent compared to Q4 2007.” This oblique statement comes from the Q4 ‘08 Executive Report issued Feb. 2, 2009 by Hildebrandt International.

The first sentence confounds me. What does it mean by “overall demand for legal services”? The next sentence refers to hours billed (obliquely, and see below), which expresses demand, but otherwise how do legal departments convey demand (or law firms recognize it) if not in requests for services that lead to amounts billed?

As to the drop off in billable hours, I assume that “negative productivity growth” means the firms in the study billed 10.4 percent fewer hours or dollars in the last quarter of 2008 than in the same quarter a year before. To that extent, doesn’t that mean the law departments that retained those firms paid the same amount less? If demand is down overall, legal department budgets should be declining.