Law schools aren’t just facing a momentary downturn. The industry has to deal with the fact that the world simply needs far fewer lawyers.

Technology, a shift to flat-fee contracts from billing for time, and globalization have shifted the salary and employment math for students considering law school forever. And the impact has trickled down to law schools, particularly those schools without premier brands or support from large universities, according to an analyst note from Moody’s.

The job statistics are brutal for recent graduates of law school—graduates who often pay six figures or more for their law degree. The unemployment rate nine months after graduation for the class of 2013 was 11.2%—up from 10.6% for the class of 2012 and 9.2% for 2011 graduates.

It took prospective law students some time after the financial crisis to recognize the profession’s new reality of fewer jobs and less pay. But if the continuing drop in those taking law school admission exams (LSATs) or applying for admission to the American Bar Association (ABA) are any indication, the US lawyer bubble has conclusively popped.

Despite a generally improving economy, which might have signalled good times for lawyers in the past, the numbers of LSAT takers and ABA applicants have declined by double digit percentages for the second consecutive year, and dropped for the third straight year:

Moody's

As bad as declining career prospects are for lawyers, the drop in applications to law school is even worse news for less prestigious and stand alone schools. Job placement drops off dramatically with school quality. Schools in the top quartile based on job placement saw between 84.1 and 97.5% of their 2013 graduates employed within 9 months. Those in the bottom quartile saw job placement rates under 71%.

The decline in demand is worst for those bottom quartile schools. Many are becoming less selective and reducing prices in response, which might further reduce perceptions of quality. At standalone schools whose debt Moody’s covers, there have been substantial drops in students attending (matriculation) and an increase in the percentage of students admitted (selectivity).

Moody's

If these trends continue, which it looks like they will, lower tier law schools can expect to consolidate and even close.