New York law firm Shearman & Sterling has laid off 38 lawyers and professional staff in the US, citing “continuing and growing economic headwinds”.

The firm said on Wednesday (8 February) that it had implemented “a limited workforce reduction” affecting 26 team members in business services and 12 lawyers "focused mainly on transactional practice areas most affected by current and projected market conditions".

The move makes Shearman the latest of a small number of leading firms — and the first Wall Street player — known to have trimmed headcount through a lay off programme with Davis Wright Tremaine, Goodwin Procter and Cooley all cutting jobs in recent weeks. 

The Shearman spokesperson put the cuts down to “continuing and growing economic headwinds and market conditions” that had led it to make “the difficult decision to adjust the size of our team in the United States”, adding: ”While it is always painful to part ways with colleagues, and we have been able to avoid these actions up to this point, it was a critical step to align our capacity levels with existing client demands."

Shearman’s announcement comes against a sharp decline in deal activity that accelerated through 2022, leading to a 33% fall in global M&A in the second half, according to research by Refinitiv, the sharpest fall since records began in 1980.

Notably, however, Shearman will be regarded as being less exposed to the bursting of the tech bubble that helped fuel the cuts at Cooley and Goodwin Procter which both pointed to their rapid earlier expansion to keep pace with booming tech markets during the Covid-19 pandemic. 

Goodwin Procter's January round of job cuts affected associates, paralegals and business professionals. Goodwin’s memo announcing the cuts pointed out that the firm’s lawyer population had grown by 60% since October 2019 and that its staffing levels at the time were too high for its projected demand. 

That followed tech-focused West Coast rival Cooley axing 150 employees including 78 attorneys last December. 

Shearman's lay off programme comes hot on the heels of Am Law 100 firm Davis Wright Tremaine confirming earlier this week that it was letting go of 21 professional staff members in areas where it had “excess capacity or redundancy and misalignment.”

It remains to be seen whether the frequency of such announcements increases as the year wears on with little immediate prospect of markets significantly recovering.

Meanwhile, Shearman's merger talks with Hogan Lovells continue against the background of a flurry of partner departures across its international network, including EMEA and Asia M&A head Phil Cheveley, who joined Sidley Austin in London earlier this week. Partners have also left its Paris, Dubai and Abu Dhabi offices in recent months for rivals including Paul Hastings, King & Spalding and Gibson Dunn & Crutcher.