Yes, Tolkien made this like additional mythology of England because there are only the Arthur legends and Beowulf.
Tolkien is a little vague about us living in Middle Earth but somewhere in the Hobbit I believe he says about the Hobbits that "they are not seen often anymore because they hide from the big people (humans)" or something like that. Also he talks about the constellations having other names "in that time", but I believe that was all in the Hobbit and maybe he changed his mind about that later.
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