The Australian economy continues to create jobs at a rate faster than most market forecasts.

Despite sluggish retail sales, falling home loan approvals, weak building approvals and a falling consumer and business confidence, employers gave jobs to another 26,900 people in May, more than most market estimates.

Over 11.05 million people are now employed, according to the ABS, a rise of 2.6% from May 2009.

The unemployment rate fell 0.2% to 5.2%, where it was a couple of months ago after revisions (and its lowest since early 2009), and the number of people unemployed fell by 25,400 to 600,900, down 8.6% on a year ago.

Market forecasts were for 20,000 jobs and an unchanged rate of 5.4%.

The west continued to lead the way — unemployment fell 0.5% in WA seasonally-adjusted, to 4.1% — a strange outcome given all those mining projects supposedly put on hold because of the RSPT. NSW also had a big seasonally-adjusted fall, down to 5.2%. Queensland and Victoria were steady.

Employers added 36,400 full-time jobs, taking the number of full-time jobs created in the last three months to more than 110,000. Part-time jobs fell for a third straight month, with about 9,400 going last month, a classic sign of an economy gathering strength.

The ABS said the aggregate monthly hours worked increased 43.9 million hours (or 2.9%) to 1,574.5 million hours. That was the first increase in a couple of months, which rebalances the equation of more jobs means more hours worked.

And the ABS said its seasonally adjusted labour force under-utilisation rate was 12.2% in May, down 0.5 percentage points from February 2010 when the survey was last done, which points to more longer-term unemployed or under-employed people getting work.

The bottom line from the figures is that there is still considerable strength in the economy and will go on driving the expansion over the rest of the year as the surge in our terms of trade kicks in.