Consumers are pessimistic, but experts predict this will have a minimal impact on household giving as the year-end season ramps up. That’s because most fundamental measures of the economy — aside from inflation — are better for most people than at any point since the pandemic began. At the end of the day, unemployment is down and markets are up over the year. Those should bode well for fundraisers in the last four weeks of 2021.
The one wrinkle is the still-mysterious Omicron variant of Covid-19, which has already created volatility in the stock markets.
Experts say the following economic indicators can help nonprofits project their fundraising outlook. Read how they’ve changed since our previous updates.
Consumer Confidence
Consumer confidence is down to its lowest level in the past 10 years, according to the November numbers out of the University of Michigan’s Surveys of Consumers. The survey tracked a 6 percent month-over-month decline in consumer sentiment, pegging it at 67.4 out of a possible 100. Inflation is the boogeyman here. In the latest survey, one-quarter of respondents said inflation was reducing their standard of living.
Don’t expect low consumer confidence to have much of an impact on giving levels through the end of the year, said Patrick Rooney, an economist who studies philanthropy at Indiana University’s Lilly School of Philanthropy.
“The consumer confidence index is probably not as predictive for household giving, especially right now,” said Rooney, noting that most American households are on stronger economic footing than at any other point since the dawn of the pandemic.
Consumer concerns reflect anxiety about the U.S. government’s ability to address big-picture issues such as inflation, Rooney said. “To the extent that it looks like we’re not capable of getting things done, that causes some concerns for people.”
Stock Market
The emerging Omicron variant has caused turmoil in the markets. Major indices were flat or down across the month of November. The Dow Jones Industrial Average was down 3.4 percent last month, while the S&P 500 and Nasdaq Composite lost less than 1 percent.
But on a year-to-date basis, it’s been good news for stockholders as major market indices all have seen big gains since January. That should be good news for fundraisers: Charitable giving rates are strongly linked to annual stock-market performance. The S&P 500 has gained 24.2 percent since the start of the year, followed by the Nasdaq, which is up nearly 23 percent. The Dow has gained 14.7 percent this year.
Those year-over-year gains are a positive indicator for household giving, Rooney said. In addition, he noted, “it tends to roll over to some degree into corporate giving and foundation grant making.”
Unemployment
The national unemployment rate declined from 4.8 percent to 4.6 percent in October, the lowest since March 2020. That’s close to pre-pandemic levels, said Rooney.
“It seems like we are re-equilibrating to a new point that looks like full employment for everybody who wants a job under current conditions,” said Rooney.
Similarly, nonprofit hiring was strong in October. Johns Hopkins University estimates nonprofit employers will exceed pre-pandemic work-force levels in less than a year.
