Shakespeare’s famous quote in Henry VI (Part 2) — “The first thing we do, let’s kill all the lawyers” — may no longer be relevant today. It seems that the lawyers are killing themselves, or at least shooting themselves in the foot.

Indeed, the allure of law school — and its promises of six-figure salaries and assured job security — is growing increasingly dim in today’s dismal job market. With a poor economy souring employment prospects, college graduates have flocked to law school in recent years, seeking some guarantee of financial security or at least the opportunity to wait out the lull in hiring. Employment patterns for recent law school graduates, however, reveal one of the worst climates for the profession in years and highlight the need to reconsider the value of a law degree.

“I think that law school can still be a good investment, but it used to be the case that almost any graduate of any law school could look forward to some high-paying career,” says Wharton legal studies and business ethics professor David Zaring. “That’s less likely to be the case now. If you get a chance to attend maybe one of [the top] 20 law schools, it’s worth going; if you don’t, it’s an investment that has to be looked at much more carefully.”

The fundamental problem that graduates face is one of supply and demand. While enrollment in law school has spiked by 11.5% over the last decade, firms have dramatically cut hiring. Large corporate firms have been hit especially hard by the recession, with the 100 highest-grossing corporate firms reporting their first average revenue decline in more than 20 years. Their struggle to find clients in a climate of financial belt-tightening is reflected in a recent employment report released by the National Association for Law Placement. NALP found that the overall employment rate for law school graduates from the class of 2010, at 87.6%, is at its lowest point since 1996. Furthermore, this rate is unlikely to improve anytime soon.

Statistics reporting on overall employment rates obscure the details of a more cheerless environment for lawyers than previously imagined. Of those graduates who have found employment, says the NALP, only 68.4% were placed in positions requiring bar passage, down from 75.9% in 2001. In the past year alone, the percentage of law school graduates obtaining jobs in private law firms has dropped five points, from 55.9% to 50.9%. According to Zaring, technology or paralegal assistants have replaced many of the jobs traditionally held by recent graduates, a trend that is likely to grow. While high-end lawyers who conduct major mergers and litigation will still enjoy steady business, “it’s going to be a lot harder to be a ‘Main street lawyer.'”

For the growing cadre of graduates forced out of the legal profession, law school is increasingly becoming an avenue to employment in business, education or journalism – or whatever sector will accept their degree. These graduates are finding that the assumption that “anyone can do anything with a law degree” no longer rings true. Indeed, JDs often represent a liability when seeking jobs in other occupations, because potential employers may assume that these graduates only plan to remain with the company until jobs in law firms open up, or that they will demand the high salaries associated with the legal profession. Written off as overqualified, many of these law school graduates find themselves denied jobs that would have been available to them had they held only a Bachelor’s degree.

Uncertain job prospects alone are unlikely to deter future law school applicants. Rapid drops in national median salaries, however, suggest the declining value of a JD. While the graduates of the class of 2009 enjoyed a median salary of $72,000, the class of 2010 showed a 13% decline, bringing in a median $63,000, according to the NALP report. With premier law schools demanding tuitions in the $45,000 to $50,000 range, the prospect of paying off that debt appears unlikely. Students trying to save a year’s worth of tuition find their options limited since only a handful of law schools offer two-year programs. While a growing number of academics and professionals question the value of the third year of law school, there is little motivation within the schools to switch to an abbreviated program: This move would trigger twin losses in tuition revenue and faculty members. “Law schools are not inclined to heal themselves,” notes Zaring.

In this light, the prospects for law school graduates are undeniably bleaker than most applicants realize. NALP executive director James Leipold emphasizes this in the employment report, noting, “The tail of the ‘Great Recession’ is long, and there are few bright spots in the employment profile for the Class of 2010…. Most of the structural weaknesses in the job market faced by the Class of 2009 intensified for the Class of 2010, and new high- and low-water statistical marks have been set.” Leipold forecasts either stagnation or further decline in overall employment rates for the classes of 2011 and 2012. And, he adds, “there is likely more bad news to come.”