Worrisome economic data for nonprofits continues to pile up, with key indicators signaling a long and difficult road ahead as costs are rising due to inflation and the tight job market is squeezing nonprofit budgets.
So far, experts say, there’s no hard evidence that the economy is causing donors to pull back in their giving. However, the big question — when do these trends become entrenched enough to cause donors to curtail giving — remains unanswered.
Here’s a closer look at some of the economic data experts say nonprofits and fundraisers should be watching.
Inflation
Prices for goods and services continue to rise at exceedingly high rates, outpacing wage growth and lowering the standard of living for millions of Americans. At the same time, inflation is making it hard for nonprofits to serve client needs as costs for food, fuel, and other staples spiral upward.
“We are the line of support when communities and families are experiencing hardship, and when inflation goes up, we see an increased amount of hardship,” said Jody Levison-Johnson CEO of Social Current, a coalition of social-service nonprofits, state associations, foundations, and for-profit entities.
Levison-Johnson noted that when government agencies hire nonprofits to provide services, they typically don’t offer cost-of-living provisions to account for inflation. She said she’s starting to see that happen occasionally, but “it’s definitely not across-the-board.”
Shannon McCracken, chief executive of the Nonprofit Alliance, an advocacy group, added that she’s concerned inflation is already hurting giving. “Consumers who are spending more at the gas pump and the grocery store are not increasing their philanthropic spending at the same rate, and that is pinching nonprofits,” she said.
The Stock Market
Experts have generally shrugged off worries about the impact of stock prices on giving, arguing that short-term fluctuations in the price of equities have little effect on the decisions of foundations and other major donors. “A foundation is not making a decision on its assets now, but on a year ago,” said Ann Kaplan, senior director at the Council for Advancement and Support of Education.
Jakada Imani, CEO of the Management Center, a consultant to advocacy organizations, agreed, saying he hasn’t noticed any significant changes in giving patterns yet.
However, the stock market has been on a downward trend long enough that it’s starting to worry Levison-Johnson. The market was flat in May, which left it down 13 percent for the year, and so far in June the market is down another 9 percent.
If donors start to lose faith in the market’s ability to turn around in a reasonable amount of time, they might start holding back a bit in their giving, said Levison-Johnson. “I recently heard from a large foundation that they are facing budget constraints, and that’s the first time I heard a foundation say that,” she said.
Kaplan added that short-term fluctuations in the stock market can affect the decisions of certain kinds of donors, such as those with donor-advised funds who may not want to liquidate stocks and make distributions to charities at a time when stock prices are sinking.
McCracken agreed that the stock market turmoil and economic uncertainty over all have become unsettling for charities. “Nonprofits are on a financial rollercoaster, and it’s hard to see how many climbs, turns, and drops are still ahead before the ride levels off again,” McCracken said.
Consumer Attitudes
Consumer sentiment continues to be volatile as Americans try to figure out where the economy is headed. After rising 9.8. percent in April, the Consumer Sentiment Index, published by the University of Michigan, tumbled 10.4 percent in May and another 14 percent in June. The trend over all so far this year is downward.
“If that number continues to plummet, it really does represent that we are likely to see changes in donor behavior,” said Levison-Johnson.
Employment Data
The unemployment rate has been steady at 3.6 percent for three months — historically a very low rate and a bright spot. Meanwhile, average hourly earnings have marched upward steadily in recent months at annualized rates of about 5 percent, which is helpful to consumers, although prices are rising faster than wages.
The growth in wages has been hard on nonprofits, said Levison-Johnson, because they often can’t compete with the salaries offered by for-profit companies.
“Nonprofits want to pay a living wage,” said Levison-Johnson. “But right now it’s really hard.”
