January Data Shows Several Warning Signs for Nonprofits and Fundraisers
The first month of the new year brought distressing economic news for nonprofits and fundraisers, with several key indicators moving in the wrong directly
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The first month of the new year brought distressing economic news for nonprofits and fundraisers, with several key indicators moving in the wrong direction.
Nonprofits and fundraisers are getting hit with a one-two punch, said Jakada Imani, CEO of the Management Center, a consultant to advocacy organizations. First, the recent declines in stock prices may cause foundations and individual donors to pull back on their giving.
Meanwhile, rising prices and a tight labor market are hitting nonprofits hard on the expense side of the ledger, Imani said. “Inflation is playing havoc with most organizations’ salary budgets as they work to retrain and attract competent staff,” he said.
Shannon McCracken, chief executive of the Nonprofit Alliance, an advocacy group, agreed, saying the latest data shows the potential for “layers of economic impacts on fundraising.”
She added: “Fundraisers can expect that donors will continue to slow the pace of their giving, postponing gift decisions to later in the year and withholding support to new organizations or programs in the short-term.”
Here are the latest economic indicators and what they mean for the nonprofit world. Also see our previous updates.
The S&P 500 plunged 6 percent in a wild month of trading in January that saw several huge swings in the market from day to day. The market briefly dipped into correction territory, which market watchers define as a drop of at least 10 percent from a recent high.
While fundraisers will start feeling the pinch almost immediately, Imani said it’s too soon to worry about the impact on grant making by private foundations. Most foundations “give based on a three-year average of their returns so the recent volatility in the stock market won’t mean much for this year’s giving,” he said.
Kathleen Enright, chief executive of the Council on Foundations, agreed, saying there are mechanisms in philanthropy that “even out the bumps” that may affect giving.
Philanthropy is fortunate to have a wide variety of individual donors and foundations with different approaches to giving, Enright said. Some give steadily over the long haul, some give more as their assets increase, and others are countercyclical, bumping up their giving when others pull back or when crises arise.
Consumer confidence stands at its lowest level in a decade. It plunged from 70.6 on 100-point scale in December to 67.2 percent in January, a decline of 4.8 percent, according to the University of Michigan’s Surveys of Consumers. Compared with the same period a year ago, consumer confidence is down 14.9 percent.
Concerns over inflation are likely a major factor behind the January decline, along with concerns that the Federal Reserve will raise interest rates in response, the researchers state.
Researchers foresee a long period of consumer malaise ahead. “Household spending had been supported by an extraordinary pace of rising home and stock prices that is likely to turn negative in the year ahead,” the report states.
Inflation makes its debut this month in the list of the Chronicle’s economic indicators, as increasing expenses for goods, services, and salaries hit nonprofit budgets.
Prices rose 7 percent last year, according to the Bureau of Labor Statistics. Inflation shows no signs of abating, and it has hit food banks especially hard as supply disruptions drive up food prices.
“Development teams will be under higher pressure to offset rising organizational costs, including operations, wages, and fundraising expenses,” McCracken said.
Some nonprofits have already been dealing with rising costs for months. Habitat for Humanity, for example, has been struggling with the high cost of construction materials.
Average hourly earnings increased by 4.7 percent last year, according to the Bureau of Labor Statistics. While that’s good news for workers, it presents a challenge to nonprofit employers to keep up or risk losing workers.
The Conference Board, a membership organization for small businesses, projects that trend will continue in 2022, with wages rising another 3.9 percent.
In yet an another sign of continued upward pressure on wages, the U.S. Bureau of Labor Statistics reported that farm employment rose by 199,000 in December, and the unemployment rate declined to 3.9 percent.
“In this employment market, that may turn into a rising tide of job changes and vacancies,” McCracken said.
A survey released in December by the National Council of Nonprofits found that 42 percent of nonprofits were struggling with job vacancy rates of 20 percent or more.
“Charitable nonprofits from across the country have reported significant difficulties retaining staff and filling vacancies,” the report states.