For all the negative impact of the Great Recession, one upside is that more ministry leaders are attentive to economic trends. They’ve learned that churches and other ministries aren’t as insulated from economic downturns as they once were.
So what’s happening with the economy today? To find out, ECCU CFO Mike Koch posed some questions to economist Stuart Strother, a professor at Azusa Pacific University (APU).
Mike: Popular opinion about whether the economy is improving varies widely. What do the numbers say?
Stuart: The macro economy is definitely improving. GDP continues to grow as American companies continue to do well selling their products at home and abroad. Consumer spending is strong and consumer prices haven’t risen much. Housing markets have rebounded. Stock markets are on fire. Although these and other macroeconomic indicators paint a picture of a country that has recovered, none of us live in the macro economy. We all have our own micro economy.
While U.S. companies are doing well, they’re in no hurry to increase hiring. This stems partly from lingering fears that the recession may return, and partly from uncertainty about the effects of Obamacare on businesses. So unemployment remains higher than what we economists call a “natural rate of unemployment,” which is about 5 percent. For those of us lucky enough to have a job these days, it’s important to remember that many remain underemployed, meaning they are working below their skill level and for lower wages. There is tremendous downward pressure on labor markets these days. My students face this harsh reality after graduation.
While housing markets have rebounded (which is good news for homeowners), young people hoping to buy their first home are, once again, being priced out of the market. And though we are all excited about rising stock prices, especially as our retirement accounts improve, this offers little help to the typical middle-class American household in the short term.
Mike: As ministries budget for 2014, how should they expect the economy to affect charitable giving?
Stuart: I don’t think charitable giving will change much. Young people continue to struggle, so they will not be a significant revenue source for ministries. Middle-aged and elderly churchgoers should continue to give as they traditionally have. In the long term, however, don’t expect the generation in their 20s and 30s to replace the giving levels of those older people who currently give the lion’s share of donations to ministries. Generation X is cynical, and Generation Y questions everything. Ministry leaders will have to re-evaluate their fundraising strategies to reach these generations.
Mike: How might economic trends outside the U.S. affect the work of ministries that operate internationally?
Stuart: This is a tough question! Economies in Europe appear fragile, while the developing world continues to, well, develop. I’m very encouraged that in countries such as China and Vietnam, where markets are becoming increasingly free, the standard of living for most people is steadily increasing. While economic growth in the U.S. and Europe is minimal, it is robust in much of the developing world.
Mike: What do you see as a troubling economic indicator today?
Stuart: I am troubled by two interrelated factors: the continued expansion of the inefficient public sector and high unemployment. As we put more resources in the hands of government bureaucrats, these resources are pulled out of the private sector, where they would have been utilized for their highest and best use. As government expands, private firms are less likely to hire. In the U.S., we have a skilled workforce that is ready to work.
Mike: An encouraging one?
Stuart: Inflation remains low, so families can continue to purchase goods and services that improve their quality of life. Many household goods are cheap today due to improved production technology and international trade. While many Americans are underemployed, at least our consumer goods have not become overly expensive. Macroeconomic conditions, however, suggest rising prices in the future. So long as The Fed keeps increasing the money supply (i.e., “printing money” through Bernanke’s Quantitative Easing program), prices must eventually rise. An increased money supply equals higher prices. That’s economics 101.
Stuart definitely knows his economic stuff. He and APU colleague Roger Conover will present a 2014 economic forecast at the upcoming 2013 Financial Forum for Ministries. They’ll also talk with Mike and ECCU Finance Director Brian Barbre about what ministries can expect in light of current economic trends.
To learn more and register, visit www.eccu.org/resources/events.