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Illustration: Sarah Grillo/Axios

The U.S. economy was resilient in the third quarter, with sales and growth powering higher despite the persistent coronavirus pandemic, increased uncertainty about the future and Congress' inability to pass another spending package to help struggling small businesses and unemployed workers.

Driving the news: Bank of America on Monday revised its third quarter growth forecast to 33%, up from 27%, and just below Goldman Sachs’ recently revised forecast for a 35% jump, up from 30%.

  • While both are well above the Wall Street average (consensus is for 25.9% growth, per FactSet), the two heavyweights' lofty predictions highlight a theme of improved expectations.

What happened: Even with fewer businesses open and social distancing restrictions in place, Americans increased their spending significantly, especially on vehicles, furniture, home renovations, electronics and at big box retail stores.

  • August's U.S. retail sales report showed a 2.6% increase from August 2019 and total sales for the June–August 2020 period were up 2.4% from the same period a year ago.
  • June and July's increases were thanks largely to direct payments and enhanced unemployment benefits paid by the government, but even after they expired Americans kept spending.

What we're hearing: "I have been surprised that we have continued to recover with the horrific death toll that we have seen in the United States and about 40,000 [COVID-19] cases a day at the moment," Chicago Fed president Charles Evans said during a virtual speech to the National Association for Business Economics (NABE) conference.

  • "We seem to be powering through some horrific personal costs and we're just going to have to see how that plays out and what the toll will be on consumer confidence going forward."

Yes, but: Concern is shifting to the fourth quarter and beyond, as economists are writing down Q4 and full-year expectations.

  • "The big bounce is largely mechanical, and the road will be more difficult from here," S&P Global analysts said in the latest global macro update, provided first to Axios.
  • "Momentum is already beginning to fade. Challenges include protecting those hardest hit, keeping viable firms afloat, and facilitating necessary structural change."

The big picture: Most economists and strategists still expect U.S. and global GDP to be sharply negative for the year — even BofA projects the U.S. economy will contract 3.6% overall in 2020.

  • Others like NABE and S&P revised up their 2020 expectations to smaller contractions but reduced their outlooks for 2021.
Data: U.S. Bureau of Economic Analysis; Chart: Axios Visuals

The historically elevated U.S. personal savings rate likely helped consumers continue spending in August.

  • The rate declined from 17.8% in July, but was still the highest since June 1975, excluding the pandemic-induced jump.

Why it matters: "Consumption drives nearly 70% of the economy, and with many service-oriented businesses only reopened partially, and with high unemployment reducing households’ ability to spend, the engine of the economy [is] impaired," JPMorgan Asset Management chief global strategist David Kelly said in a recent presentation.

By the numbers: U.S. personal income declined 2.7% and disposable income fell 3.2% last month, the Commerce Department reported on Thursday.

  • However, spending still rose for the month and is up 40.3% on a three-month average annualized pace, RSM chief economist Joe Brusuelas pointed out in a recent note.

The last word: "The latter is part of the rebound narrative that will likely result in a third-quarter gross domestic product increase that arrives above 30%, while the former clearly indicates that the pace of spending is slowing," Brusuelas said.

Go deeper

America's population growth is slowing down

Data: William H Frey analysis of US decennial censuses 2010-2010, 2020 Census Demographic Analysis released December 15, 2020; Chart: Danielle Alberti/Axios

Even in an unlikely "high growth rate" scenario, America's population has grown at the slowest rate since at least the 1930s, according to recent Census Bureau projections for the last decade.

Why it matters: America is aging. There is a growing number of people out of the workforce, and a relatively smaller number of people trying to support them — a situation that could cripple programs like Social Security and slow economic growth.

Why 401(k) rollovers are so annoying

Illustration: Aïda Amer/Axios

If you happened to change jobs recently, you may have tried to transfer your retirement account from your former employer into an Individual Retirement Account or your new employer's 401(k) plan. If so, you probably encountered a bureaucratic gantlet — and you're not alone.

Why it matters: Kludgey processes around retirement account transfers result in people losing track of their funds, giving up important tax advantages, or otherwise disadvantaging themselves and being less prepared for retirement.

The hard math behind America's labor shortage

Data: Bureau of Labor Statistics, Congressional Budget Office; Chart: Axios Visuals

Yes, the pandemic has created unusual temporary labor market dynamics. But in the bigger picture, the 2010s were a golden age for companies seeking cheap labor. The 2020s are not.

The big picture: In the 2010s, the massive millennial generation was entering the workforce, the massive baby bo0m generation was still hard at work, and there was a multi-year hangover from the deep recession caused by the global financial crisis.