July 16 (Bloomberg) -- First- and second-year law students at Harvard Law School were told not to panic over the recession and summer jobs.

Law students should stay informed, keep in contact with prospective employers, prepare well for summer jobs and save as much money as possible, according to a memo distributed to students by the school’s career services office on March 6.

“Almost every day, there is news of law firms laying off attorneys, delaying start dates, freezing salaries and, in some cases, even rescinding offers,” the school said in the memo. “Now is not the time for avoidance, denial or panic. Instead, keep a cool head and focus on the things that you can control.”

In the early months of 2009, the largest U.S. law firms began firing junior lawyers, delaying the start dates of first- year associates, and revamping compensation models. Summer jobs for law students are under budget constraints, and this month Orrick, Herrington & Sutcliffe LLP and Morgan, Lewis & Bockius LLP said they won’t hire students for summer jobs in 2010.

Harvard Law students preparing to enter their second- and third-year this fall remain concerned, but not discouraged, Mark Weber, the school’s assistant dean for career services, said July 14 in an interview.

“What we try to tell students is if you do well, focus on your studies and do good work when you’re at the firm, the rest will take care of itself,” Weber said.

Harvard advises students to have a Plan B for their job search, according to Weber.

Baltimore, Milwaukee

“If you are looking in D.C., consider Baltimore or Richmond,” he said. “If you’re looking in Chicago, try Milwaukee and St. Louis, too. You need to be casting a wider net in this market.”

The shrinking market for law school graduates coincides with a shift in legal services. Control has moved from law firm partners, who traditionally raised their rates every year, to the heads of corporate law departments, who demand that firms perform more efficiently and cheaply.

Morgan Lewis, a Philadelphia-based firm with more than 1,400 lawyers, said July 14 it wouldn’t hire any law school students in summer 2010, citing lagging demand for legal services.

The decision is part of a broader strategic shift, which includes a switch to performance-based compensation, Morgan Lewis said in a statement. The firm is hiring partners from other firms and working with clients who seek fee reductions, according to the statement.

Client Relationships

“We’re running our own business and focusing relentlessly on client relationships,” Morgan Lewis Chairman Francis Milone said in the statement. “Doing so responsibly means continuing to reduce expenses, committing to the people in whom we are already invested, and looking at compensation across the board to ensure our structure matches the reality the entire legal industry must face.”

In March, Morgan Lewis fired 55 lawyers and 161 staff.

At the same time, the firm decided to delay start dates for its 2009 first-year associates until October 2010 and to defer the full-time start-dates for its 2009 summer associates until October 2011, Morgan Lewis hiring partner Eric Kraeutler wrote in a letter to law schools.

The firm will do no on-campus interviewing this fall, Kraeutler wrote. It plans to discuss with law schools how to improve the campus recruiting process.

“The national economy is still volatile and the legal economy remains anemic,” James Leipold, executive director of the Association for Legal Career Professionals, said in an e-mail. “Law firms will likely have to try a variety of experiments and novel practices in the coming months to manage both finances and talent amidst all of this uncertainty.”

‘First Responsibility’

Some law school deans have responded positively to Morgan Lewis, according to Kraeutler, the hiring partner.

“They appreciate our openness and they understand why we feel our first responsibility is to the people who are already here,” Kraeutler said in an interview. “They are anxious to get into the dialogue about better ways to recruit in the future.”

Law school students should focus on building their skill set, Kraeutler said, emphasizing that the firm is committed to continue hiring first-year associates. The firm will give offers to some of its current class of about 90 summer associates, to start in the fall of 2011, he said. He declined to comment on whether the firm will hire summer associates in 2011.

Morgan Lewis was the 12th-highest grossing U.S. law firm in 2008, with $1.12 billion in revenue, according to the American Lawyer, a trade magazine.

To contact the reporter on this story: Cynthia Cotts in New York at ccotts@bloomberg.net.

Last Updated: July 16, 2009 00:01 EDT