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Illustration: Aïda Amer/Axios

U.S. economic activity fell more sharply in the second quarter of this year than during any other quarter in history. It's also going to grow more sharply in the third quarter of this year than during any other quarter in history.

  • The recession is over, according to Wall Street, with current forecasts showing sustained economic growth through 2021 and beyond.

Why it matters: The novel coronavirus is still raging in the U.S., with well over 5,000 Americans still dying every week. But the continued prevalence of the pandemic doesn't seem to have crimped economic growth.

The big picture: America is in bad economic shape, and we've had very little economic stimulus since the federal government's $600 weekly unemployment checks stopped arriving in July.

  • Some 30 million Americans are on the unemployment rolls, entire industries are at a standstill, and economic output remains hundreds of billions of dollars below its pre-pandemic levels.

The other side: The Federal Reserve on Wednesday released its official forecast for how the economy is going to fare this year.

  • In June, when coronavirus cases were declining quite quickly, the Fed expected that we would end the year with unemployment at 9.3%, and saw the economy shrinking by 6.5%.
  • Today, with coronavirus deaths still at their June levels, the Fed is much more optimistic. It sees 2020 ending with unemployment at 7.6% and an economy that has shrunk by just 3.7%. That's still terrible, of course, for workers who are out of a job and businesses that are fighting for survival.

By the numbers: The difference is huge — almost 3 million extra jobs, and more than $600 billion in economic activity, over and above what the Fed expected just three months ago.

Data: FactSet; Chart: Axios Visuals

Wall Street has seen a similar turnaround in growth expectations. Quarterly GDP growth is measured on an annualized basis. On that basis, economic forecasters in April expected the third quarter to see a bounceback on the order of 13%.

  • By June, their forecast had improved to 18%. Now, they expect third-quarter GDP to grow at an astonishing 25.2% rate.

Between the lines: The rise in growth forecasts comes in the wake of new data showing surprisingly robust economic activity over the course of the third quarter, which ends next week.

  • It also shows just how difficult it is to make economic projections when there is no real precedent to look to.

The bottom line: "The path of the economy will depend significantly on the course of the virus," said the Fed in its most recent statement. But the past couple of months of economic growth have proved that the economy can grow much faster than expected even while the virus still rages.

Go deeper

Labor Department: Unemployment benefits won't lapse despite delay

People in line outside a food pantry in Brooklyn, New York, in November 2020. Photo: Xinhua/Michael Nagle/Wang Ying via Getty Images

The Department of Labor said Tuesday that it does not expect people claiming certain federal unemployment benefits to experience a lapse in payments, despite President Trump's delay in signing the program extensions into law, Bloomberg reports.

Why it matters: It was previously expected that because Trump signed the legislation the day after benefits expired, the estimated 14 million people collecting Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation benefits would miss a week of payments.

15 mins ago - World

World leaders react to "new dawn in America" under Biden administration

President Biden reacts delivers his inaugural address on the West Front of the U.S. Capitol on Wednesday. Photo: Alex Wong/Getty Images

World leaders have pledged to work with President Biden on issues including the COVID-19 pandemic and climate change, with many praising his move to begin the formal process for the U.S. to rejoin the Paris Climate Agreement.

The big picture: Several leaders noted the swift shift from former President Trump's "America First" policy to Biden's action to re-engage with the world and rebuild alliances.

Updated 4 hours ago - Politics & Policy

In photos: The Biden and Harris inauguration

President Biden and first lady Jill Biden watch a fireworks show on the National Mall from the Truman Balcony at the White House on Wednesday night. Photo: Chip Somodevilla/Getty Images

President Biden signed his first executive orders into law from the Oval Office on Wednesday evening after walking in a brief inaugural parade to the White House with First Lady Jill Biden and members of their family. He was inaugurated with Vice President Kamala Harris at the U.S. Capitol on Wednesday morning.

Why it matters: Many of Biden's day one actions immediately reverse key Trump administration policies, including rejoining the Paris Agreement and the World Health Organization, launching a racial equity initiative and reversing the Muslim travel ban.