The economy showed signs of life in January, but many nonprofits remain mired in an ongoing sense of economic uncertainty.
Inflation rates have slowed and consumer confidence has increased. Despite these positive trends, many nonprofit organizations are still struggling to cope with the soaring demand for their services. With most of the Covid-era aid funds already gone, many groups are continuing to adapt, says Anne Hindery, executive director of the Nonprofit Association of the Midlands, a membership group of nonprofits from Iowa and Nebraska.
“We didn’t just learn to spin — we had to learn to pirouette,” says Hindery, who noted that some small nonprofits in her area have considered merging or closing due to struggles to increase services provide and hire enough staff while continuing uncertainty.
Here’s a closer look at some economic data that says nonprofit officials should beware.
inflation
Inflation continues to show signs of slowing down, registering a growth rate of 6.6 percent in January 2022. While this was a slight increase from the previous month, it reflects a significant drop from last year’s painfully high rates.
But the impact of those slower rates hasn’t spilled over to Americans — or most nonprofits — says Jennifer Hutchins, executive director of the Maine Association of Nonprofits.
Even as inflation cools, human service nonprofits are still seeing increased demand from people struggling to keep up with the cost of basic necessities like eggs and diapers.
“I’m glad inflation is slowing down, but I’m not noticing it at the grocery store, and nonprofits aren’t quite noticing it yet,” says Hutchins, adding that increased demand has overshadowed any positive economic trends for many nonprofits.
unemployment
The job market remains extremely strong, with the national unemployment rate at 3.4 percent, the lowest since 1969. The low unemployment rate continues to pose challenges for nonprofits, which are struggling to hire staff amid rising demand and rising inflation-linked wages.
Hiring employees is more difficult for nonprofits than other employers in business because nonprofits’ income comes largely from donations, grants, and contracts that often can’t keep up with rising costs, Hutchins says.
“There are many nonprofits in the industry that want to support their workers and pay them a living wage,” she says. “So far we have struggled to really keep our wages at the level we want.”
In states like Nebraska, where unemployment is below the national average, nonprofits have an even harder time attracting new employees, Hindery says. As permanent hybrid and remote jobs become more popular across the economy, many nonprofits are losing potential local talent to states with higher average wages — a sort of virtual domestic brain drain.
“We used to compete with other non-profit organizations or the government for employees in our region,” she explains. “Now we’re seeing it can come from nonprofits in other states.”
Finding accountants, directors and fundraisers for nonprofits has been particularly difficult over the past year, says Hindery, who noted that her association’s job board is now posting about five times the number of job openings per month it was before the pandemic.
consumer sentiment
Consumer confidence rose 8.7 percent in January from the previous month, as measured by the University of Michigan Consumer Sentiment Index. The rise suggests that as fears of inflation and recession ease, Americans have become more optimistic about their financial prospects and are more willing to spend money on the goods and services that matter to them — or on their favorite charity.
Despite these positive signs, nonprofits still struggle to attract donations from individuals, Hutchins says. While some large nonprofits reported successful year-end fundraisers, many small charities struggled to gain a foothold with donors who are still struggling in an uncertain economy.
“More money might appear to be being donated, but it’s coming from a few very wealthy individuals who are looking for larger individual organizations,” says Hutchins. “It’s not the bread and butter of the nonprofit sector that really relies on its local communities and individuals.”
stock market
The stock market remains volatile, in part due to the Federal Reserve’s efforts to curb inflation by raising the cost of borrowing. Still, a benchmark stock index, the S&P 500, ended January up 6.2 percent. The gains marked the S&P 500’s best January since 2019, buoyed by optimism that the Federal Reserve would further slow the pace of its rate hikes.
However, uncertainty over future Federal Reserve action and disappointing earnings at major retailers have kept stocks volatile in recent weeks.
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