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I would tell the truth in a non-accusatory way. As a first year, you’re absolutely not expected to be bringing in business or generating your own work. Every senior lawyer will immediately understand what you mean - the business was declining, not your fault. Just be sure to emphasize the experience that you did get and don’t let them get the impression that you did nothing but a final proof read of discovery requests for a year.
Do not wait to be laid off, that makes finding your next gig that much harder. One year out is early to be switching but certainly not unheard of, “work has slowed down and I wasn’t getting good opportunities” is a perfectly legitimate reason to be looking.