The report noted that demand for legal services is expected to drop this year
Agility and innovation are set to be critical factors in US law firms’ success this year, according to Thomson Reuters’ 2025 Report on the State of the US Legal Market.
The report indicated that 2024 was a strong year for firms based on three definitive metrics: demand, rates, and expenses. In particular, the rise in demand was solid across both counter-cyclical and transactional practices. Moreover, billing rates ticked up at the quickest rate since the Great Financial Crises; this was accompanied by expenses stabilizing.
However, demand is likely to slow this year given that historically, demand growth is difficult to sustain in the long run, Thomson Reuters said. Uncertainty in the US and global economies is also a contributing factor, although the report suggests that the economic and geopolitical instability resulting from the US presidential election could also drive demand as lawyers get called on to mitigate risk. Moreover, expense growth is anticipated to stay high.
The report highlighted technological investment, alternative pricing structures, and changing talent models as factors that could help firms sustain success this year. In particular, firms are transitioning towards making seasoned lateral hires, stepping away from the hiring of junior associates. Two-tier partner structures are seeing growth as well; thus, firms that change up how they measure and reward lawyer performance are well positioned to sustain success.
“Agility and innovation will be the hallmarks of the firms that make the most of this moment as technology advancements transform the fundamentals of the market, shaping how legal services are delivered and the traditional practice of law,” said Raghu Ramanathan, president, Legal Professionals at Thomson Reuters, in a statement.
Ramanathan singled out generative AI as a major factor in firms’ growth.
“There has been an undeniable impact of generative AI on the legal market, and it has the potential to continue driving robust growth by enabling lawyers to be more efficient and productive, while boosting law firm profitability. We’ll continue to see this effect as more firms invest in new technologies and implement AI and generative AI solutions, streamlining their workflows and improving the quality of their work,” Ramanathan said.
Future of Professionals report data suggested that AI was a leading priority for the profession and is expected to save professionals 12 hours a week by 2029, Ramanathan added. This information was supported by customer feedback.
The 2025 Report on the State of the US Legal Market was published by Thomson Reuters in partnership with the Center on Ethics and the Legal Profession at Georgetown Law.
