According to the Thomson Reuters Institute’s latest Law Firm Financial Index, law firm profitability slowed in the first quarter of 2022. The index score hit its lowest point since the third quarter of 2009 — a steep decline that may take many people by surprise given how busy lawyers and firms are.

By most indicators, 2021 was one for the record books. All of the 100 top-grossing U.S. law firms tracked by American Lawyer reported gross revenue growth, buoyed by high demand in M&A and other transactional work. That demand led to a talent war that pushed starting associate salaries from $190,000 to $215,000 at many major firms, on top of numerous bonuses.

In line with this, direct expenses — namely lawyer pay — shot up more than 13% in the quarter while overhead costs such as recruiting and marketing climbed nearly 10% over the past year.