Changes in the US Legal Market: What Managing Partners Need to Act on Now

Changes in the US Legal Market: What Managing Partners Need to Act on Now

According to an article by Joan Feldman in Attorney at Work, summarizing the Thomson Reuters Institute’s 2026 Report on the State of the US Legal Market produced with Georgetown Law’s Center on Ethics and the Legal Profession, the US legal market is performing strongly on the surface while exhibiting warning signs beneath. Demand and profits remain elevated, but shifting client behavior, rising costs, and structural misalignment are creating fault lines that firm leaders need to address proactively rather than assume current conditions will persist.

Feldman explains that demand growth in 2025 was real but uneven, with midsize firms capturing a growing share of work as general counsel pushed matters downstream for cost control, while large firms concentrated on premium, high-stakes engagements. At the same time, technology and talent spending rose sharply, with firms layering AI investments on top of existing headcount rather than reducing costs. The report notes that compensation growth and technology spend are now consuming a significant share of firm revenue, a dynamic that remains sustainable only as long as demand and rates stay high.

The report also highlights a growing disconnect between AI-driven efficiency and the billable-hour model, alongside cooling buyer sentiment and forecasts pointing to demand softening in mid-2026. Feldman underscores the report’s historical warning: similar combinations of booming demand, rapid expense growth, and widespread optimism preceded prior downturns in the US legal market.

Recent profits are real but fragile. Firms that act now to align pricing with delivery, discipline cost structures, communicate value in business terms, and build flexibility into their operating models are better positioned to protect margins and client relationships when conditions tighten. Waiting for clearer signals may mean acting too late.