According to Wells Fargo’s Legal Specialty Group, U.S. law firms’ biggest challenge in the near term will be dealing with keeping their expanded ranks of attorneys busy as they face a drop in demand.

The law firms that Wells Fargo surveyed reported a 1.9% drop in demand — calculated as the number of hours lawyers bill — with the top 50 highest-grossing law firms seeing a 2.9% drop.

Wells Fargo surveyed more than 140 law firms, including 68 of the top 100 highest-grossing U.S. firms.

The drop in demand comes as law firms have kept on most of the lawyers they hired in 2021 and in early 2022 to handle a record-breaking amount of M&A work — lawyer count was up 4.5% in 2022.  But the M&A market cooled in 2022, dropping 37% compared to 2021’s record-breaking $5.9 trillion in global announced deal work, according to Refinitiv.

Lawyers in 2022 logged fewer billable hours than the year prior — 1,568 hours per lawyer, 102 fewer hours than in 2021.

Owen Burman, a senior consultant in the Wells Fargo unit, said he was surprised there haven’t been more layoffs across the industry.