Yeah, people do recover, but it definitely takes time, so don't lose hope. First off, don't panic or make any massive changes until the update's completely finished rolling out. Rankings tend to fluctuate wildly during a rollout and honestly can sometimes settle back down on their own once the dust settles.
Since you're already working on content and backlinks, just make sure you're focused on quality over volume here. Look closely at the sites that took your spot on page one and see what they're doing differently from you. A lot of recent recoveries have come from cleaning up thin content and making sure your pages actually match what the user's searching for, instead of just forcing more links at the problem. Stay patient, keep analyzing your competitors, and things should sort themselves out over time.