The salad days are over for Washington's billion-dollar legal business.

Signs of slowdown and retrenchment are everywhere among the city's 21,000 lawyers in private practice, as recession-pinched clients cut back on legal services and federal regulatory agencies, whose activities spawned business for many a lawyer, reduce their rule making and enforcement efforts.

Arnold & Porter partner Abe Krash said this is the first time in 25 years that the legal business has contracted here. Washington lawyers won't be sleeping on subway grates, but Krash said, "There is no question that there is a recession" in the law community.

Local appeals of regulatory agency decisions have been cut in half in recent months. Firms specializing in work with government agencies like the Environmental Protection Agency or the Securities and Exchange Commission have been hardest hit.

The Federal Trade Commission, for example, "just isn't suing anybody any more," William Ross, a partner in one of the area's largest firms, Wald, Harkrader & Ross, said recently. Several partners have left that firm in the last year or so and, according to one source, billings are down substantially from what had been budgeted for this year.

Houston's Bracewell & Patterson, which specialized in energy regulation work, recently cut its 40-lawyer Washington office to 29. The local 40-lawyer firm of Bergson, Borkland, Margolis & Adler, which specialized in antitrust work, is in the midst of what one partner called a restructuring that might pare the firm by more than a third.

Legal Times, a newspaper of the Washington legal community, reported recently that a survey showed a marked slowdown in the growth of the industry here. The top 25 firms in the city have increased their legal staffs by just 5.9 percent over 1981 levels, the newspaper reported -- barely over half the average annual growth rate since 1978 of about 10 percent.

In addition, Legal Times reported that the top 25 firms plan to hire 20 percent fewer associates this summer and fall than they did last year. Lawyers out of work are finding the market very tight these days, legal job search firms report. "Firms are hiring young lawyers fresh out of law school but they are not interested in experienced lawyers unless those lawyers bring business with them," said Susan Schneider, director of Washington Legal Search Inc. "Law firms are looking for lawyers who can 'save' them."

"It used to be that if you were a really good lawyer, you could go anywhere," Schneider said. "Now that's not the case. That's what makes this situation now so different. After three years out of law school, its very different now to move from law firm to law firm."

Schneider said she had one client, a former Harvard Law Review member, who would like to change jobs after several years with a federal agency but cannot leave because his talents are not marketable. "Even partners with more than $100,000 in personal billings have trouble moving these days," she said.

Lawyers not affected by the cutback in government work say they are experiencing problems from the general economic downturn. Clients are slower to pay their bills and are complaining more about the hefty fees their lawyers charge, several lawyers said in recent interviews. Businesses seeking to cut costs have in the last few years begun to rely more on their own "in-house" lawyers, rather than using outside firms for routine legal work.

The virtual collapse of the housing market has severely cut business for small firms and independent lawyers who specialize in housing work. One lawyer who left his criminal law practice at U.S. District Court to work in real estate recently found himself back in the local court because the housing work just was not there.

"Lawyers who had 90 percent of their work in house closings just can't support themselves anymore," said Arthur F. Konopka, a general practice lawyer who specializes in that area. The impact of the housing slump has been buffered slightly by the fact that widespread use of innovative financing schemes has made for more legal work in connection with those sales that are made.

However, Konopka said, many one-time housing specialists now are taking other kinds of cases, such as divorces.

Despite dramatic downturns in some key areas, there still is plenty of business to go around, partners at several large firms said. For one thing, bankruptcies are up, and that means business for lawyers specializing in that area. Many firms, especially those involved in international trade, communications or tax law say their business is up as well.

Lawyers in large and small firms all over town say the boundless optimism of just a year ago has given way to concern about the future.

Lawyers at larger firms, like Covington & Burling or Arnold & Porter, said they are keeping busy, but not as busy as they were a year ago. Those firms, with a broad list of major corporate clients, are better able than smaller firms to shift resources when business drops off in one or two areas.

Even firms like Wilmer, Cutler & Pickering, with 110 lawyers, are concerned. For the first time, Wilmer, Cutler has set up a business development committee.

At the same time, it is making sure clients are not angered by high bills. One source reported that some lawyers there are trying to keep billings down by, among other things, no longer booking rooms in the fanciest hotels when they travel.

Several lawyers said they believed that as the economy improves, so will the legal business. But many agree that, while business may recover somewhat, the easy living of recent years may never return.

"The bloom is definitely off the rose," said Ken Feinberg, who opened a D.C. branch for New York's Kaye, Scholer, Fierman, Hays & Handler in 1980. The branch plans to expand from 17 to 22 lawyers by October, Feinberg says, but "looking down the road, lawyers even in the good firms have got to wonder where the business is going to come from."