Double whammy

For many nonprofit charities, economic recession delivers a two-pronged stick in the eye. Rising unemployment swells need for services. And the tightening of bank accounts shrinks donations.

That combination adds up to bleak headlines splattering the pages of newspapers throughout the country: "Food banks can't meet demand." "Dip in donations endangering Boys and Girls Club." "More need help, but fewer give to charities."

The news got only worse last month with prominent nonprofits announcing significant administrative layoffs. Colorado Springs-based Focus on the Family let go 149 employees and eliminated another 53 unfilled positions, an 18 percent reduction in workforce. Susan G. Komen for the Cure, a group aimed at funding breast cancer research, trimmed staff at its Dallas headquarters by 16 percent. Smaller groups, like the American Lung Association and the National Domestic Violence Hotline, have made similar cuts.

But amid such malaise, glimmers of hope shine all the brighter. World Vision, a global relief agency with an annual operating budget of close to $1 billion, surveyed nationwide charitable giving attitudes in the face of economic gloom. The results: Seven in 10 adults plan to spend less on holiday gifts this season, while half of those surveyed say they are now more likely to make charitable donations.

Too good to be true? Not so, says Domestic Campaigns director John Yeager: "Our numbers on our gift catalog right now are ahead of projections. The results are holding true."

World Vision's Canadian outpost reports similar trends and recently released a corroborating national survey, which indicates that eight in 10 Canadians plan to maintain or increase charitable giving during this Christmas season. The reason for that donation boon according to 65 percent of respondents: The current economic downturn makes them "more likely to want to help those who are less fortunate."

But how do such results square with the myriad stories of layoffs and food bank shortages? The National Council of Nonprofits reports that many groups are seeing donations dwindle while needs escalate. That "double whammy," as organization president Tim Delaney calls it, prompted the council to launch the Nonprofit Economic Vitality Center, a resource that gathers and reports best practices and strategies for weathering the current giving gap.

Yeager did not care to speculate as to why funds may be drying up for some nonprofits but not others like World Vision. For an organization that allocates about 90 percent of its resources for international programs, the stateside recession has yet to push donors away toward more domestically focused charities. A $75 goat earmarked for villagers in remote undeveloped areas remains the overwhelming top seller from the World Vision gift catalog, outstripping domestic options like school supplies or children's clothing.

"When times get tough, maybe Americans can identify a little bit more with the plight of people who are making $2 a day," Yeager said, offering his best guess as to why overseas giving remains strong. "This time of year people are extremely generous, but they want something meaningful. When they look at our gift catalog and see where the money goes, it's very meaningful."

Just as shoppers on a tight budget are more prone to scrutinize every purchase, givers now seem more intent than ever on leveraging their charitable contributions for all they're worth. Nonprofits must compete for the hearts and dollars of donors, and those providing the most essential services often hold a considerable advantage.

Indeed, the organizations reporting the greatest fundraising woes are those engaged in long-term health initiatives, political and cultural renewal, or other efforts of less immediate concern. At Focus on the Family, for example, the reduced giving led to eliminating the print editions of four of its eight magazines-Plugged In, Breakaway, Brio, and Brio & Beyond. Each of those publications remains available online as the organization adjusts to maintain maximum impact on a budget that dipped from a projected $160 million to $138 million for the current fiscal year, which began in October.

Similar cuts at a social service agency might yield more urgent impacts. Salvation Army spokesperson Melissa Temme believes that reality helps explain why her organization is able to flourish amid a tough economy. "In many cases, we've seen an uptick in donations during difficult times," she said, noting that giving has maintained or even increased slightly in the country's current episode of financial grief. "There are a lot of charities competing for donors' dollars, but many of the health organizations or very specialized charities that may not deal with basic human needs tend to struggle during difficult economic times."

In recent years, the advent of widespread internet access and the practice of charities posting annual financial reports online has created a more educated and particular pool of prospective donors. Churches and individuals research potential recipients of their charity dollars with all the vigilance and savvy of consumers. "Donating to a charity is viewed like buying a car," Temme said. "People know what they want, efficiency is often a big factor, and they do their homework. It's not necessarily about the charity anymore; it's about the cause."

Still, reputation matters. The Salvation Army attracts its foundational donor base largely due to unwavering evangelical commitment and streamlined operations. During the Great Depression, the organization managed to continue serving the poor via its partnership with local churches and the willingness of affiliated pastors to open church doors and live among the homeless.

That history generates respect and name recognition, the true test of which will come at the conclusion of the Christmas season when the 128-year-old organization tabulates totals from its kettle campaign now collecting contributions at storefronts across America. As yet, strong giving has prevented any need for layoffs or the elimination of services.

But keeping up with demand is another matter altogether. "In talking with people who have been around 30 to 40 years, many are saying that this is the most significant increase in demand they've seen in their time with the Army," Temme said. "It's great that our donations, particularly with the economic downturn, are staying even if not increasing, but it does not appear they're increasing at the same rate as the demand for services. It's a big testament to Americans and their generosity that they see others in need and continue to give, in some case more than they did previously. At the same time, it may not be enough."

Some Salvation Army food banks are among those nationwide reporting that even well-stocked shelves will require an extra boost this season if they are to keep up with the lengthening lines of need. Over the Thanksgiving holiday, many food distribution centers dipped into Christmas reserves to keep from turning people away, a move that now requires donors to make up the difference.

Nevertheless, optimism among nonprofits remains high, World Vision's surprising survey perhaps contributing. "It gives hope for nonprofits," Yeager said of the poll, which Harris Interactive conducted on World Vision's behalf. "It says that there's a bigger heart out there than a lot of us believe exists."

Stores and rumors of stores

The polls told tales of squeamish shoppers. Investors redirected money away from retail chains. And online rumors swirled of massive retail layoffs, store closures, and bankruptcies.

Yet, in the early morning hours of "Black Friday," stomachs still full of turkey and pumpkin pie, shoppers formed lines outside the locked doors of their favorite merchants, eager as ever to unload piles of cash and credit on opening day of the holiday spending season. By closing time Nov. 28, consumers nationwide had dropped about $11 billion into the supposedly stagnant retail marketplace.

Estimates from ShopperTrak, a firm collecting data from some 50,000 retail locations, put in-store sales for the day at $10.6 billion, a 3 percent jump from last year's figure and 12 percent increase from 2006. Online spending accounted for another $534 million in sales, a 1 percent uptick from a year ago, according to leading digital commerce tracker comScore.

"Under these circumstances, to start off the season in this fashion is truly amazing and is a testament to the resiliency of the American consumer, and undeniably proves a willingness to spend," said ShopperTrak co-founder Bill Martin.

But one day does not a recession-buster make. Sales on Nov. 30 dipped to $6 billion, a modest drop from the $6.1 billion of 2007. The numbers have since descended further, reigniting concern that analyst predictions of an overall 10 percent drop in holiday sales this season could prove spot on.

That's bad news for many retailers hoping the December rush could halt an increasingly desperate revenue tailspin. Major national chains, including Circuit City, Linens 'n Things, and Mervyn's, have already filed bankruptcy. Others, such as Ann Taylor and Charming Shoppes Inc., the parent company of Lane Bryant, Fashion Bug, and Catherine's, are planning hundreds of store closures.

Such shutdowns stand to benefit consumers as companies seek to liquidate inventory in going-out-of-business sales. Nevertheless, many consumers are reluctant to spend amid the gloomy economy no matter the dropping price points. And internet rumors that failing stores may refuse to honor gift cards have only worsened retail prospects. A widely circulated hoax email warned that dozens of chains would close after the holidays, rendering gift cards useless.

Eddie Bauer and Ann Taylor were among those named in the email, each having since issued statements assuring customers that gift cards will remain valid. Other companies are hoping the public will see through the hoax. Even before the email surfaced, the National Retail Federation had projected gift card sales would drop 6 percent to $24.9 billion this season.

However consumers respond, massive layoffs from store closures will escalate unemployment and ultimately reduce consumer buying power. Already over the past year, about 320,000 retail employees have lost their jobs, a figure that accounts for one in four of all jobs lost over that period. National unemployment is ticking up near 7 percent and could eclipse 8 or 9 percent before a market turnaround, according to many economists.