Just a few years ago, Goldman Sachs estimated that artificial intelligence had the potential to automate nearly half of legal work—an assessment that triggered apocalyptic warnings of a coming meltdown in the job market for lawyers and law firm professional staff.
At least for the moment, those predictions have proven premature. In fact, the legal industry job market has boomed, and at least one recent report posits that there have never been more people working in the U.S. legal industry.
According to industry analysts, the job growth is being driven by a surge in demand for legal services and the need for technology-savvy talent to help transition law firms to an AI-driven future.
Will this golden era for legal jobs last? The picture is decidedly murky. An economic shock—a surprise trade war, for instance—could lead to a slowdown in law firm hiring and even downsizing. And while artificial intelligence has not yet resulted in mass layoffs, AI is challenging law firm billing models and the potential for AI-related job displacement continues to loom over the legal industry.
Record Hiring
An analysis by Reuters of U.S. Bureau of Labor Statistics (BLS) data found that the legal sector employment is at record levels. Preliminary jobs data from December shows the legal industry with 1,208,100 jobs. That figure is slightly higher than the previous record set in 2023, Reuters said.
Most of those jobs are held by lawyers, although the count also includes paralegals, assistants and other legal workers at companies, law firms, government agencies, and nonprofit organizations, Reuters reported.
Legal industry employment contracted sharply after the Great Recession of 2007-2009, plunging from a May 2007 high of just under 1.18 million jobs, according to an August 2025 review of BLS data by Reuters. The legal jobs market took nearly 15 years to fully recover, Reuters said. Reuters noted that the hiring trends are for the entire legal market. However, it reported that one segment, the Am Law 200, defied the post-recession spiral, with headcount growing 87% from 1999-2021.
Legal Unemployment Dips to ‘All-Time Low’
Last year, employment rates within a year of graduation were the highest ever recorded, according to data from the American Bar Association and the National Association for Law Placement (NALP). The ABA reported in March that 82.2% of 2024 law school graduates had found jobs in roles that required bar admission. The unemployment rate among new graduates was 4.7%—down from 5% for the class of 2023.
In July, NALP showed employment rates for new law school graduates had reached their highest rate since the organization began tracking the data in 1982.
At the same time, NALP reported an unemployment rate of 5.1%, “a new all-time low,” according to a news release.
The In-House Market
Increased hiring is not limited to law firms. In a recent report on global legal market conditions, recruiting firm Major, Lindsey & Africa said permanent and interim hiring for in-house roles was strong with talent needs “becoming increasingly strategic and specialized.”
Major Lindsey said demand is rising for candidates with “strong tech fluency and niche expertise.” With artificial intelligence changing legal workflows, “AI-savvy legal talent is in high demand, but low supply. In the year ahead, legal departments will continue to prioritize business and financial acumen and cross-functional capabilities as legal teams further evolve into key strategic partners,” the recruiting firm said.
Private equity, M&A, corporate governance, and healthcare have seen the strongest hiring, Major Lindsey said, along with “consistently high demand for securities and healthcare lawyers at all levels.” Hiring for senior legal executives, including general counsel, has also proceeded at a steady rate, particularly in regions like the Bay Area and Boston. For those positions, “biotech, life sciences, fintech, and regulated industries continue to be the most active sectors.”
The Year Ahead
As for the year ahead, Major Lindsey said, “both permanent and interim hiring are generally anticipated to trend upward, with many clients bullish on 2026 and planning to add headcount in anticipation of a reaccelerating economy.
Highly regulated industries will continue to hire at a steady rate.”
In addition, the firm predicts “a wave of GC retirements should continue through 2026.” More than 130 Fortune 500 companies have GCs over age 60, Major Lindsey said.
A Law Firm Surge
On the law firm side, increased hiring by law firms is being driven by “a surge in demand that’s lifting profits to record heights,” according to the Thomson Reuters Institute's 2026 Report on the State of the U.S. Market. That surge, the report states, “stems not from economic health but from chaos—trade wars, regulatory upheaval, and geopolitical tensions—all of which require constant legal navigation.”
Released in early January, the report is based on financial data provided by 184 U.S.-based law firms, including a mix of Am Law 100 and Am Law Second Hundred firms, as well as midsize firms ranked outside the Am Law surveys, which rank the largest firms by gross revenue. It is supplemented by interviews with 2,500 buyers of legal services with revenues of $50 million or more.
Law firms, the report notes, are “racing to capitalize” on economic and political instability with new technology and new hires. Spending on salaries increased 8.2% over 2024, a year which also “saw growth at twice the rate of core inflation,” Thomson said. “This isn’t targeted spending on a few rainmakers or strategic lateral hires, rather it’s broad-based compensation growth across every level,” the report said.
Law Cuts Its Own Path
Along with efforts to hire and retain lawyers, firms have seen overhead expenses per lawyer climb by 4.3% and support staff costs rise 6% to support their new lawyer talent. While other industries “may be touting AI-induced layoffs” to demonstrate their efficiency, “the legal industry has chosen the opposite course,” Thomson notes.
Indeed, firms in the Thomson survey grew headcount by nearly 3% in 2025, the third consecutive year of historically strong hiring, the report said.
Since January 2023, in fact, “the average midsize and Second Hundred firm has grown their total headcount by more than 8%, with the average Am Law 100 firm holding to a more reserved 5%,” Thomson said.
Shifting Talent
The Thomson report also notes that a number of large Am Law 100 firms are increasingly focusing their practices on private equity clients and transactions that are “commanding astronomical fees and creating seemingly endless demand for sophisticated deal work.” In response, a few practice groups that do not fit into this model have decamped for Am Law Second Hundred and Midsize firms.
“These moves aren’t departures of underperformers,” Thomson said. “Rather they are strategic realignments of successful lawyers bringing substantial books of business and established teams to firms eager to expand.”
As a result, larger firms are more profitable because they are “concentrating on ultra-premium work like [private equity] and pushing rates higher. Midsize and smaller firms receive a “talent infusion and gain the expertise and client relationships they can use to justify their own aggressive rate increases.”
Whether this is a short-term development or a sign of a major realignment of law firm talent is an open question. If the economy stumbles and the deal market dries up, larger firms may rue the departures. “How sustainable this situation is may be a question for all participants, especially if more difficult times are on the immediate horizon,” Thomson said.
Mixed Signals
The Thomson report warns that firms “are spending like the current revenue conditions represent a permanent shift rather than a temporary spike.” The only way the current “dual arms race” among firms over technology and talent is sustainable is if they can continue to raise rates and maintain demand, Thomson said.
Rates are already under pressure. The spike in corporate law department hiring is being driven, in part, by companies bringing legal work in-house to save money. And in-house teams have begun questioning when they will see financial benefits from AI.
A 2025 Association of Corporate Counsel survey found that 59% of companies said they “have seen no clear savings yet” from outside counsel who use AI.
According to Reuters, in the second half of 2025, clients were more than twice as likely to seek out lower-cost midsize firms as they were firms in the Am Law 100. “Meanwhile, generative artificial intelligence threatens to trigger greater scrutiny of legal bills and rates,” Reuters noted.
A Blurry Future
Whether firms can continue to rely on record levels of demand is even less clear. What is certain is that if corporate clients reduced demand significantly, many law firms would be saddled with historic levels of spending on talent and technology.
For their part, economists and financial analysts see moderate growth ahead for the U.S. economy in 2026, with recession fears fading. That should be good news for firms.
On the other hand, if shocks like unexpected tariffs or trade embargoes upend the economy, law firms may be left in a highly vulnerable position. As one legal industry analyst recently told Reuters, “My main concern is that firms might take the view from the summit as a sign that everything is well.”
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David L. Brown is a legal affairs writer and consultant, who has served as head of editorial at ALM Media, editor-in-chief of The National Law Journal and Legal Times, and executive editor of The American Lawyer. He consults on thought leadership strategy and creates in-depth content for legal industry clients and works closely with Best Law Firms as senior content consultant.
