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San Francisco’s hospitality sector is recovering jobs and the labor market is hot, but a recession may be coming. That is the opinion expressed by the city’s chief economist in a recent report from the city Controller’s Office.

Leisure and hospitality led job growth among industry sectors as a strong summer travel season begins both locally and nationally. The return of conventions to the city is also helping. Hotel occupancy and rates in early June exceeded the 2019 average for the first time since the start of the pandemic, according to the Controller’s Office.

Meanwhile, unemployment in San Francisco fell to 1.9 percent in May, the lowest rate ever recorded. But job growth is slowing.

“At the moment, slowing job growth in San Francisco has more to do with labor shortages than with companies not trying to hire,” San Francisco’s chief economist Ted Egan said by email. “Active job listings far exceed new hires.”

That may change as the Federal Reserve raises interest rates to lower inflation, raising concerns of a recession.

“I think a recession is increasingly likely,” Egan said, though the data in the controller’s report do not point to it.

Most of the data in the controller’s report is backward looking, Egan said.

“Employment is generally a lagging indicator of the economy, and most of the indicators we’re looking at either directly or indirectly look at employment,” Egan said. “The only indicator where we may be seeing some softness is housing prices.”

Housing prices are starting to moderate in San Francisco because of rising mortgage rates and permits issued for homes have dropped since the start of the year, according to the controller’s report.