The Thomson Reuters Institute and Georgetown Legislation’s Middle on Ethics and the Authorized Occupation launched their annual State of the U.S. Legal Market report at the moment, and the excellent news is that regulation companies are completely crushing it. Income are up. Charges are up. Demand surged in 2025 at ranges the trade hasn’t seen in additional than a decade. The Am Legislation 100 is printing cash, midsize companies are having a second, and everyone seems to be congratulating themselves for his or her “resilience.”
Have we ever seen numbers like these earlier than? *Laughs nervously in Lehman Brothers*
The authorized trade has surged like this earlier than — in 2007 earlier than the International Monetary Disaster (GFC), and in 2021 earlier than an inflation crunch — and every time, companies that mistook altitude for stability discovered themselves falling furthest when situations shifted.
To start with, it looks like terminal lawyer mind to initialize the recession. The time period solely comes up three extra instances! However extra importantly, the market’s current exuberance coincides completely with previous crashes. Take a second to brush off that resume.
The report opens with an prolonged metaphor in regards to the formation of the Himalayas, crediting tectonic forces for sending peaks hovering into the ambiance, whereas noting that “the very forces creating at the moment’s peaks are concurrently undermining the bottom beneath them.” For the authorized market, this interprets to a market closely reliant on authorized issues producing hefty income within the quick time period and leaving legal professionals unemployed within the medium time period. It’s the regulatory whiplash and random commerce wars and throughout geopolitical instability. That’s why the market noticed peaks in each transactional work and counter-cyclical work, a feat the report describes as “extremely atypical, once more aside from in intervals of extreme market disruption.”
If chaos is a ladder, the Trump administration is a mountain vary and the authorized market is excessive sufficient to start out getting delusional from oxygen deprivation. Sadly, when you hit the summit, there’s nowhere to go however down, passing the corpses of 2007 and 2021 alongside the best way.
Throw into this unstable enterprise local weather the truth that companies are pouring cash into synthetic intelligence with the passion of a tech bro who simply found ketamine. Legislation companies elevated expertise spending by almost 10% in 2025, racing to deploy AI instruments that may draft briefs and analyze contracts in minutes as an alternative of hours. On the similar time, they elevated lawyer compensation by 8.2% and grew headcount by 2.9%. On the similar time, some 90% of all authorized {dollars} nonetheless stream by means of customary hourly billing preparations.
Spending extra to do work in much less time whereas getting paid by time. The report diplomatically describes this as creating “an nearly absurd pressure.” It’s why the billable hour ought to get a critical rethink in 2026… but probably won’t.
The result’s a standoff that will be comical if the stakes weren’t so excessive. Consumer interviews reveal that company authorized departments need their outdoors regulation companies to suggest progressive billing options that incorporate AI’s efficiencies, whereas regulation companies complain that shoppers nonetheless consider all the pieces by changing it again to hourly charges. Why spend months growing a complicated value-based pricing mannequin when the procurement group will simply divide the full by estimated hours and examine it to final yr’s charges?
That is why authorized can’t have good issues.
And so somewhat than work out a brand new billing answer, shoppers are busy determining the best way to minimize prices. Why transfer to value-based billing when leaning on AI-optimized hours offers shoppers a straightforward place to nitpick?
Spending happening proper when regulation agency prices are going up? Sounds troubling.
Thomson Reuters Market Insights analysis calls this phenomenon a consumer worth squeeze, and it’s turning into a significant factor behind these constrained spending decisions inside company authorized departments. Whilst 86% of GCs say they consider they’re making important contributions to organizational aims, almost 90% report that useful resource limitations are stopping them from delivering the extent of strategic impression their organizations count on.
OK, why didn’t we abbreviate this? You invent a brand new time period and don’t give it the “CVS” remedy?
The essential perception right here isn’t that there could also be much less authorized work on the horizon — if something, the complexity and chaos assure continued want for authorized providers. As a substitute, it’s that shoppers are being compelled to make more and more brutal decisions about which companies get their restricted {dollars}.
The mathematics isn’t difficult. When Am Legislation 100 legal professionals cross the $1,000/hour threshold whereas everybody else averages round $600, GCs begin making completely different decisions. The report calls this “cellular demand.” Regular folks would possibly name it “buying round.” In any occasion, between excessive prices and expertise narrowing the hole between what massive and small companies can pull off, shoppers see extra worth at cheaper price factors.
Shoppers truly spent much less per hour on common authorized providers in 2025 than in 2024. That is regardless of companies elevating charges 7.3%. Fairly clear proof that charge hikes are pushing work downstream.
Midsize companies surged forward with almost 5% demand progress within the latter half of the yr whereas the Am Legislation 100 couldn’t crack 2%, ensuing within the largest share point-spread hole in demand between the highest and backside segments for the reason that GFC. For a lot of the yr, the Am Legislation 100 truly contracted whereas smaller companies captured all the expansion. Certainly, prime companies wanted the third quarter’s explosive surge simply to crawl into constructive territory for the yr.
There’s the GFC once more, which nonetheless feels like an ominous Roald Dahl character.
However whereas the report forecasts continued want for authorized providers amidst the chaos, it does see that want shrinking too:
Legislation companies are doing nice as a result of the world is on fireplace, AI is poking holes of their pricing mannequin, and shoppers are working out of endurance. That’s not a golden age; it’s a sugar excessive. And historical past suggests the crash will come proper after everybody finishes congratulating themselves for surviving the final one.
And right here’s the half that ought to actually maintain Biglaw up at evening. After the 2008 monetary disaster — sorry… the GFC — company authorized departments absorbed laid off expertise and used this newfound expertise to get stingier with companies. “Instantly GCs had former Huge Legislation legal professionals on workers who knew precisely how companies made up their payments, which issues required senior consideration, and what work could possibly be carried out for a fraction of the worth,” the report notes. This rewiring of the firm-client relationship performed a key position in the rise of absurd billing guidelines and heightened all-around scrutiny.
If this involves go once more, company authorized departments may also come armed with AI instruments able to remodeling each bill dialogue right into a monetary colonoscopy. And their rebound hires would possibly be capable to use different AI merchandise to maneuver in-house all that work that after required the brute power of a giant agency. A spherical of layoffs that give shoppers extra outdoors counsel refugees might, at this level, tilt the steadiness of energy irrecoverably towards shoppers.
So benefit from the view from the summit! Perhaps all this mountaineering will turn out to be useful when companies must open their new Greenland workplaces.
Joe Patrice is a senior editor at Above the Legislation and co-host of Thinking Like A Lawyer. Be happy to email any suggestions, questions, or feedback. Comply with him on Twitter or Bluesky if you happen to’re considering regulation, politics, and a wholesome dose of school sports activities information. Joe additionally serves as a Managing Director at RPN Executive Search.
