The US law firm bonus market appears to have stabilized as New York powerhouse, Cravath Swaine + Moore has set its benchmark bonuses for 2003 at last year’s rates. Cravath’s typically sets the top of the market in the New York bonus season and will pay first year associates awards of $17,500, rising to $25,000 – the same as the 2002 bonus season.

Like most elite US firms, Cravaths’ awards are handed out solely on a seniority basis with no performance criteria.

Cravaths’ announcement, which was made to associates on 8 December, ends weeks of intense speculation over whether New York firms would this year sanction significant increases to the awards handed out in 2002, given the post-summer pick-up in deal activity.

Associate bonus awards, which have fallen sharply since the boom year of 2000, are regarded as a key yardstick of confidence in the competitive New York market.

One senior New York partner told Legal Week: “This is a sign of stability in bonuses and guarded optimism in the general market.”

The announcement is likely to prompt similar moves by Cravaths’ traditional peers, which include Davis Polk & Wardwell and Sullivan & Cromwell.

The first major US firm to declare its hand was Skadden Arps Slate Meagher & Flom, which announced on 25 November that it would repeat last year’s rates of between $2,500 and $20,000. The firm’s lower bonuses are the result of its higher starting salary.

Signs of relative pay restraint from US law firms will be welcomed by top London firms, which often match such bonuses for their US-qualified lawyers, despite lagging far behind US firms in terms of profitability.