Despite Moderate Economic Growth, Outlook Remains Positive for Year End

Charities face a steady economic outlook as they enter the year-end giving season.

The late-summer surge of Covid-19 cases is receding. The economy continued to grow in the third quarter. The stock market is doing well. All of those should indicate positive conditions for nonprofit fundraisers. A good economy is generally good news for giving.

“With the markets at all-time highs and the economy slowly opening up, the charitable holiday cheer season should be a good one,” said University of Chicago economist John List.

But around the edges, price inflation and hiring troubles continue to depress the economic outlook for many American households, which could affect the charitable disposition of middle- and working-class households.

Experts say the following economic indicators can help nonprofits project their fundraising outlook. Read how they’ve changed since our previous updates.

GDP

Gross domestic product increased 2 percent in the past three months, notably slower than the nearly 7 percent growth rate seen in the second quarter, according to the Bureau of Economic analysis. The quarter coincided with a resurgence in Covid cases of the Delta variant and the expiration of many pandemic relief programs, such as expanded unemployment benefits.

Consumer Confidence

Consumer sentiment continues to hover near post-pandemic lows, where it has remained for the past three months, since the Delta surge in Covid-19 cases dashed collective hope that vaccination programs would mean a return to pre-pandemic lifestyles. The University of Michigan’s Surveys of Consumers pegs its index of consumer sentiment at 71.7 out of 100 in October, down 1.5 percent from September. That’s 12.3 percent below October 2020. Consumers remain pessimistic about inflation, supply shortages, and the government’s ability to surmount those challenges.

These concerns affect middle- and lower-income households more than wealthy households and could influence their decisions about charitable giving. Patrick Rooney, an economist at Indiana University’s Lilly School of Philanthropy, said the ongoing effects of the Covid economy could exacerbate long-term downward trends in donor participation.

“It seems to be a sustained trend,” said Rooney, who emphasized that donor-participation rate data for this year is not yet available.

Regional Economic Indicators

Several Federal Reserve Bank districts reported slowing economic activity over the past six weeks, according to the Federal Reserve’s “Beige Book,” which reviews regional economic conditions across the country every six weeks. But “moderate” growth was the overall sentiment from regional Fed officials reporting on the past six weeks. Notably, the Federal Reserve Bank of Richmond and the Federal Reserve Bank of San Francisco said nonprofits were reporting strong giving but were having difficulties hiring workers.

Unemployment

The national unemployment rate fell to 4.8 percent in September, down 0.4 percent from the month before. The number of unemployed people fell to 7.7 million. Both numbers are still well above pre-pandemic levels. Nonprofits remain 1 million jobs short of pre-pandemic levels.

Stock Market

Despite the mixed conditions outside Wall Street, major stock indices are all up over the past month. As of October 29, the Nasdaq Composite gained nearly 6 percent in October, the Dow Jones Industrial Average was up about 4 percent, and the S&P 500 gained 5.4 percent. Fundraising trend lines are tightly yoked to increases in stock-market value.

“Most of the signals for the stock market are positive,” said Rooney. “The economy is continuing to grow, though not as fast as some people might prefer.”