No, the sky isn’t falling. Drooping in spots, yes. But definitely not falling. That’s the consensus among hiring partners, legal headhunters, and law school placement officials when asked to assess the fall 2005 job market.

First, the bad news: A handful of firms have cut lawyers loose either through layoffs or through the performance-review process (firms generally avoid acknowledging layoffs for fear of appearing financially troubled), and experts expect additional cuts by the end of the year. As another cost-cutting move, some firms have rescinded partners’ equity status and put them back on salary.

Certain practice areas have been hit especially hard. Take mergers and acquisitions, for example. According to data released by Thomson Financial, the dollar value of M&A deals worldwide dropped 62 percent in the first quarter of this year compared with the same period last year. “Firms reliant on megadeals are definitely feeling it,” says James Herschlein, a hiring partner at New York’s Kaye Scholer.

What about the Internet work that fueled the growth of so many firms in the past few years? Forget it. “The three guys with an idea and a pitch book who could pick a number in the millions, that’s dried up,” says Herschlein. That doesn’t just mean fewer dot-com-related jobs. It also means that industrywide salary inflation and the competition among firms for associates bred by the dot-com boom are all but kaput.

Still breathing? Good. Here’s the happier news: Despite the doomsday rumors flying at law firms, on law school campuses, and on Greedy Associates, experts say talk of a meltdown is overblown.

The reason: The tepid economy is only that—tepid. It’s weak in spots, but the United States is not in an across-the-board recession. The last serious law recession came in the early ’90s. Today, says John Donley, a hiring partner with Chicago-based Kirkland & Ellis, “there’s no comparison.”

Some practice areas, as a matter of fact, are thriving. “There’s a slowdown in auto, but energy prices are up, which means energy practice is up. And there’s an explosion in employment practices,” says Susan Gainen, the director of career services at the University of Minnesota Law School. Other strong areas: IP, real estate, bankruptcy, and litigation (when times get tough, the tough start suing).

Here’s another reason to exhale: So far, placement directors report no drop-off in the rate of on-campus recruiting this fall. In fact, the number of recruiting schedules for September has increased at some schools. And many firms say, at least for now, that they are committed to hiring at the same levels as last year.

Firm recruiters say they learned a lesson from scaled-back hiring during the early-’90s recession. “New people are our future,” says Skadden, Arps, Slate, Meagher & Flom hiring partner Wallace Schwartz. “Two or three years from now, we don’t want to be short on talented young attorneys.”

That said, placement directors caution that it’s too early in the hiring cycle to tell whether some firms may reconsider.

So what changes should you make if you’re in the market for a job? First, research with extra diligence the practice areas and firms that are still going strong. And redouble your efforts to sharpen your skills. In a tight job market, firms will be scrutinizing candidates more carefully than ever, says Gainen. Put in the extra effort at the office, push for the better grade in class—make yourself stand out. And ramp up your networking. “Go out and talk to people, do outreach,” says Gainen.

And if the offers you want don’t materialize? If you’re a 3L and you don’t get an offer from the firm you summered at, line up a reference letter from someone who will speak to the quality of your work, and prepare a good explanation for why the firm didn’t make you an offer—the next firm will ask.

Another smart strategy: Be open to creative ideas. Law school officials say that the last time the job market was rough, it caused students to reflect more on what they really wanted to be doing. Says one associate dean, “In the world of opportunity called the legal profession, there are lots of ways to use the JD.”

Finally, remember this: “Whether it’s an up economy or a down economy, the market is cyclical and things will change,” says Gibson, Dunn & Crutcher hiring partner Kevin Rosen. “Don’t sweat the short term, and don’t focus on what’s going on in the economy this quarter or this year or next year,” adds Kirkland’s Donley. “If you’re smart and you want to be a good lawyer, the odds are, you’re going to do well.”