Today the ABS released the Labour Force data for May 2010 which show that the unemployment rate has fallen by 0.2 percentage points ostensibly, if you believe the press reports and the comments from the bank economists, on the back of continued strong growth in full-time employment. The truth is different. While full-time employment growth was positive it is not accelerating and overall employment growth slowed in May 2010. More importantly, all the fall in unemployment was due to a further drop in the labour force participation rate. So employment growth remains sluggish and is barely keeping pace with the growth in the population. The good news is that aggregate hours worked continued to increase which is reducing underemployment a little. While the bank economists have hailed today’s figures as indicative of an economy “near full capacity”, the reality is that the data is consistent with a broad array of statistics showing the Australian economy is slowing as the effects of the fiscal stimulus dissipate and and private spending remains subdued. It is amazing how a few headlines can distort what is actually going on.