WASHINGTON (Reuters) - The U.S. economy should bounce back sharply in the third quarter after its deep coronavirus-related collapse, but it will not fully retake recover lost ground until sometime after next year, the non-partisan Congressional Budget Office said on Tuesday.

In an updated economic forecast, the CBO projected the economy would contract at a 37.7% annual rate in the second quarter, but expand at a 21.5% pace in the July-September period.

Even so, U.S. Gross Domestic Product will not return to its heights from the start of this year within the forecast period that runs through the end of 2021, the agency predicted.

With much of the nation shut down to halt the spread of the novel coronavirus, the economy has taken its biggest hit since the Great Depression of the 1930s.

A staggering 20.5 million people lost their jobs in April, as the unemployment rate jumped to 14.7%, a post-World War Two record, from 4.4% in March.

The CBO said it expected the jobless rate would hit a peak in the third quarter and projected it would average 15.8%.

While it forecast a steady decline from there, it cautioned that the recovery would be prolonged.

“The persistence of social distancing will keep economic activity and labor market conditions suppressed for some time,” the CBO said.

Even by the fourth quarter of 2021, the jobless rate would likely remain at a relatively lofty 8.6%, with the level of employment still below where it stood at the start of this year, it said.

The economy contracted at a 4.8% rate in the January-March quarter. Output is expected to contract at as much as a 40% pace in the second quarter, the deepest since the 1930s.