The Size of Your Entering Class Matters. A Lot.

By James Leipold

 

The legal employment and law school admission markets are closely intertwined. Fortunately, we have been enjoying a very strong job market for law school graduates for at least five years running, but that may be about to change.

For better or for worse, the reputation and popularity of legal education is often reduced to the relative “success” or “failure” that law graduates have in the job market in the months following graduation. That is likely even truer now that U.S. News & World Report has tweaked its ranking formula to place more emphasis on legal employment outcomes. News about the legal employment market has both direct and indirect consequences for law school application volume and legal education itself.

Last month, NALP released its latest report card on the strength of the law firm recruiting market for law school graduates, reporting that “fewer offers were made for students to join summer 2023 programs, with the number of offers decreasing by nearly 2% compared with those made for the 2022 program.” That is the first slowdown reported in recruiting metrics since the onset of the COVID-19 pandemic.

There are many important and competing goals in legal education, and one of the things that we sometimes forget when we have our heads down and our collective shoulders to the plows is that the entire enterprise exists in a marketplace and is subject to the same peaks and valleys that describe every marketplace. That is certainly true of both law school application volume and law school graduate employment outcomes.

Over the long arc of history, however, the employment market for new law school graduates has been both steady and resilient and has experienced fewer dramatic ups and downs than the law school admission market. That said, there have been some notable peaks and valleys. In the aftermath of the Great Recession, the job market for law school graduates tanked and the unemployment rate for law graduates soared to its highest rate ever.

Between 2008 and 2013, the job market for law school graduates deteriorated precipitously, and the graduating classes of 2011, 2012, and 2013 had the weakest employment outcomes ever measured by NALP. Fewer students from those classes found any sort of jobs following graduation than any of the classes that had preceded them, and of the jobs that were secured, fewer students found jobs for which bar passage was required, and far fewer found first jobs in private practice than ever before. The Class of 2013 had the lowest overall employment rate of any class before it, measured at just 84.5% nine months after graduation. The Classes of 2012 and 2013 had the lowest rates of employment in jobs that required bar passage, and the Class of 2011 had the lowest rate of employment in private practice of any class since NALP began collecting this data nearly 50 years ago, falling below 50% for the first time.  Prior to that, between 55% and 58% of all law school graduates had always found jobs in private practice dating all the way back to the beginning of the current data collection practices. One result of this collapse of the job market for law school grads was a dramatic decline in the number of law school admission applications.

But the story of why that dramatic dip in law school graduate employment happened is complicated.  Curiously, while the job market was indeed weak in the years following that recession, the global, national, and legal job markets were actually in a period of recovery and growth during the three years that law school graduates notched their worst collective employment outcomes. The real culprit? Dramatically rising entering class sizes at a time when the job market could not support a larger cohort of graduates seeking jobs.

The class that entered U.S. law schools in the fall of 2010 and would go on to graduate in 2013 was the largest class ever to enter the American legal education pipeline. Entering class sizes had crept up over time, and at 52,488, the class that entered in 2010 was larger than all the classes that had preceded it. When that large class graduated, they struggled mightily to find work. The attention the press and social media focused on the high unemployment rate of recent law school graduates that followed did real harm to the reputation of American legal education, and over the next five years, applications to law schools fell dramatically. First-year enrollment fell from more than 52,000 to just over 37,000 in five years. Beginning with the class that entered law school in the fall of 2015, a new sort of balance in the marketplace was achieved and U.S. law school first-year enrollment held steady at about that 37,000 for three years and then rose to about 38,000 for the next three years. The class that entered law school in the fall of 2020 and will graduate and take the bar this year was 38,202.

With the smaller entering classes, U.S. legal education had more or less rightsized itself, as the number of jobs available for new law school graduates more closely mirrored the actual number of graduates. The economy continued to improve and with smaller class sizes, the employment outcomes for law school graduates steadily improved. Beginning with the Class of 2014, the job market for new law school graduates has shown steady improvement for eight years, notwithstanding the recent COVID interruptions and a slight temporary bobble in the employment rate for the Class of 2020, the class that suffered the most direct impact of the first year of the COVID-19 pandemic. The most recent results available, those for the Class of 2021, show one of the strongest markets ever for law school graduates with an overall employment rate of 91.9% ten months after graduation; a bar passage-required employment rate of 78.2%, the highest ever measured; and a private practice employment rate of 57%, well within the historically normed range of 55% to 58%.

Why is all of this relevant now?

A couple of things are converging that make it important to pay attention to these patterns of peaks and valleys right now. The class that entered law in the fall of 2021, and that will graduate and take the bar in 2024, jumped in size by more than 4,500 to 42,718. It is impossible to know the exact economic circumstances that class will face when they graduate, but we have been skirting another recession for more than 12 months, and the new recruiting data from NALP that documents a small slowdown in entry-level recruiting by large law firms comes amidst headlines about falling demand for corporate legal services from large law firms, cost-cutting measures at law firms, layoffs at law firms, and more importantly, perhaps, layoffs at large corporations, particularly large technology companies that have been the engine of recent economic gains. It is foreseeable that this larger class, the Class of 2024, is going to graduate into what is likely to be a softer employment market, and it is likely that their overall employment rate will be lower than the classes that have immediately preceded them. Law schools will need to do everything they can to help graduates from that class secure jobs, but there will inevitably be headlines and social media energy around that weaker job market, and that will inevitably have some impact on law school applications.

The good news is that the jump in law school enrollment in the fall of 2021 did not carry over into the fall of 2022. The class that started last fall was 38,020, back in that comfortably rightsized zone that the contemporary legal employment market can support. There are other pieces of good news. The current economic slowdown, whether it slides into an actual recession or not, is not likely to be as dramatic as the slowdown that occurred in 2008. The Class of 2022, whose full employment outcomes have just been reported to the ABA and to NALP but have not yet been publicly reported, is also likely to notch strong employment outcomes, perhaps as strong as the Class of 2021. The small trimming by law firms of their recruiting activity this past fall does not necessarily herald the beginning of a spiral into a weaker job market for law school graduates. But it comes as a warning shot across the bow. American legal education would do well to admit conservatively for the immediate future. That is particularly important to think about now as law schools begin to turn to their waitlists.

The one thing that is fairly clear, at least to me, is that current economic circumstances will not support healthy employment outcomes for entering classes of more than about 40,000 at the most. We are likely to get a taste of the downside of larger classes with the Class of 2024. We have an opportunity to contain another round of reputational harm to American legal education, and we should take that opportunity very seriously.

James Leipold

Senior Advisor, LSAC

James Leipold is a senior advisor with the Law School Admission Council. Prior to joining LSAC, he worked as the executive director of the National Association for Law Placement in Washington, D.C., for more than 18 years.