Stubbornly high inflation rates and painful stock-market declines have complicated the outlook for the end-of-year giving season, a crucial time for most nonprofits that rely heavily on donations from individuals.
These economic pressures are also continuing to strain nonprofit budgets as prices rise and demands for pay increases from employees continue. That’s one reason the year-end giving season will need to be especially bountiful to help nonprofits keep up.
Still, experts pointed to some reasons for optimism in year-end fundraising, including rising consumer confidence and spending amid hopes of moderating inflation. There is a possibility, experts say, that the economy will head into a recession, and questions remain over how the Federal Reserve’s attempts to quell inflation will ultimately affect the labor market, which remains strong.
Here’s a closer look at some of the economic data experts say nonprofit officials should be watching. Also see our previous updates.
Stock Market
The S&P 500 declined 9.3 percent in September, hitting a new low for the year and marking its third straight losing quarter. It was the popular Wall Street benchmark’s steepest monthly loss in more than two years.
The sliding stocks may have the most impact on large donations made to nonprofits, which are more likely to be tied to the stock market than other economic indicators, says Danielle Vance-McMullen, an expert in donor behavior and assistant professor at DePaul University. Her advice to nonprofits that rely on major gifts: Keep in close touch with donors when the economy shows signs of weakness. (For more advice, see How to Get Big Donors to Give in Troubled Times.)
“The benefit of major gifts is that those are donors you really know,” says Vance-McMullen. “You have the opportunity to really communicate the urgency of the need and why now is still important, despite what’s going on with their assets.”
While nonprofits that rely on individual donors may have reason to fear a turbulent market, Kathleen Enright, CEO of the Council of Foundations, says grant makers can remain a vital source of revenue for nonprofits during downturns because their investment portfolios tend to be based on long-term views and they can choose to tap more of their assets to respond to urgent needs, as they did during Covid.
“When markets dip, foundations can give where the support is most needed, and they can balance out support for issues that take a long time to change,” says Enright. “Foundations are built to balance out some of these bumps in the road.”
Consumer Confidence
Despite those mounting losses on Wall Street, consumer confidence continued to rise in September, according to the latest figures from the University of Michigan. Consumer confidence rose 0.7 percent to 58.6 this month, a slight increase from August and the third straight month of gains.
This increase comes amid hope that inflation might be easing, even as recession fears remain, says Vance-McMullen. If the trend continues into the end of the year, it would bode well for giving by people who make donations from their job earnings, she says.
“I would expect if we don’t get bad news on those indicators that we could have a good year for those kinds of income-based gifts,” says Vance-McMullen.
Inflation
Prices rose 8.3 percent in August from the same month last year, according to the Labor Department’s consumer-price index, which was released last month. The department will release its data for September 2022 on October 13.
While still stubbornly high, the number represented a slight decline from the 8.5 percent inflation rate recorded in July 2022. Patrick Rooney, professor of economic and philanthropic studies at the Lilly Family School of Philanthropy at Indiana University, says that inflation — and attempts by the Federal Reserve to temper inflationary pressures — have created a complicated environment for giving.
“It’s been very difficult for the Federal Reserve Board and federal government — through monetary and fiscal policy — to thread that mythical needle of decelerating the economy just enough to curb inflation and not too much to trigger a recession,” says Rooney.
Rising prices are also a continuing challenge for nonprofits because their expenses are soaring.
Unemployment
Unemployment remains low, though the number of job openings across the country plunged significantly in August, according to data released by the Department of Labor this month. Since 2021, Americans have quit their jobs at record-breaking rates in what’s come to be known as the Great Resignation. That indicates that the difficulty of hiring for open positions and widespread staffing shortages, which have plagued nonprofits for months, may be easing slightly.
In September, the unemployment rate stood at 3.5 percent, a slight decrease from the previous month’s rate of 3.7 percent, matching the country’s lowest rate in 50 years.
The low unemployment rate bodes well for the economy and giving over all, Rooney said. He predicted that even as the Federal Reserve increases interest rates to temper inflation, the labor market will remain relatively strong. Last month, Jerome Powell, chair of the Federal Reserve, forecast that the national unemployment rate will reach 4.4 percent by the end of the year.
Says Rooney: “Because unemployment is so low, and because of the Great Resignation, the Federal Reserve Board doesn’t have to be as worried about increasing unemployment as they normally would be.”
