So How’s that Recovery Treating You?

So how’s that recovery treating you?     I am NOT a crepe hanger, trust me.  But I am concerned that nonprofits aren’t being so smart smart about this “Great Recession.”  While economics experts  tell us that the recession has begun to recede, they are also telling us something even more important for nonprofits.    Economists are now calling this a “double-dip recession”—meaning that the recession “technically ends” but then, before we get into true and real sustained recovery, there is another economic downturn.

According to CNNMoney.com, the 1980 “minor” recession was followed by “a more pronounced downturn that lasted from the middle of 1981 throughout the end of 1982.”    This phenomenon of a double-dip recession only magnifies the recovery difficulties facing the nonprofit sector.  I and others have been saying since the beginning, that nonprofit recovery will lag behind recovery of the rest of the economic engine of the country.  Thus, if recovery starts in 2010 for the rest of the country, it will take until 2012 or even 2013 for the nonprofit sector to really begin recovery.  Now with these pronouncements of being in a double-dip recession, recovery could be even further out than 2013.

In the 9/14/09 issue of Newsweek, Robert Samuelson called the recently past Labor Day “the bleakest since at least the 1980s”—and unemployment hadn’t yet topped 10%.  He shares other little tidbits that don’t bode well for the nonprofit sector.  For instance:  in 2014, unemployment will average 7.6%; over borrowed households will first look to repay debt, making any other spending “sluggish”; and, the one I find the most scary for already tapped social service and education nonprofits—“the child poverty rate could jump from 18 percent in 2007 to 27 percent.”

Switching to an equally potent set of data points, “The Chronicle of Philanthropy” (6/18/09) had the following sub-header to an article titled “When Will It End?”:  “If this recession turns out to be like the one in the mid-1970s, donations won’t rebound until at least (emphasis added) 2012.”  The article points out two other key points of information which nonprofits must heed.  First, it took three full years for giving to nonprofits to bounce back after the recession of the 1970s (which, by the way, is not one I’ve seen flagged as a double-dip recession), which means it took three years for giving to reach the level at which it had been when the recession started.  Three years to get us back to three years ago!  And second, “[e]very 100-point drop in the Standard & Poor’s 500 stock index causes contributions to fall by $1.85 billion….”

Add this all up and what do we have?  An important warning for nonprofits:  do NOT breathe a big sigh of relief when announcements are made that the recession is over.  We’ve got years to go before we recover to where we were when the whole thing started, and years after that to move beyond.  During this time, many in our sector will likely see the demand for their services explode.  Organizations—from boards to staff—cannot proceed with “business as usual,” as usual is no longer.  We must work smarter than we ever have if we want to be here serving our clients in 2020.