* June nonfarm payrolls increase less than expected
* Average hourly earnings unchanged
* Futures up: Dow 40 pts; S&P 4.5 pts; Nasdaq 12 pts (Adds comment, updates prices)
By Sweta Singh
July 2 (Reuters) - Wall Street was set to open higher on Thursday after data showed labor market weakened in June, indicating that the U.S. Federal Reserve could hold off on raising interest rates in September.
Nonfarm payrolls increased 223,000 last month, below the 230,000 that economists polled by Reuters had expected.
Average hourly earnings were unchanged, taking the year-on-year increase to a tepid 2.0 percent.
"It is a slightly disappointing payroll number. If anything, it buys the Fed a little more time before the first rate hike," said Wilmer Stith, a fixed income portfolio manager at Wilmington Trust in Baltimore.
"It puts September a little more in question," Stith added.
The jobs report was being closely watched for indications of a rebound in the economy from a first-quarter slump.
The Fed has said that it will raise rates only if it sees signs of a sustained recovery in the economy.
Futures contracts showed that traders now see January as the first Fed meeting when a rate hike is more likely than not, based on CME FedWatch, which tracks expectations using its Fed funds futures contracts.
The Fed has kept short-term rates near zero since December 2008, resulting in reduced borrowing costs for companies.
The jobs data overshadowed concerns over Greece, which has weighed on the markets in recent weeks.
The Greek government aims to secure a deal with creditors on Monday, a day after the referendum in which Greeks will vote on whether to accept or reject a bailout offer made by lenders last week.
S&P 500 e-minis were up 4.5 points, or 0.22 percent, with 193,290 contracts traded. Nasdaq 100 e-minis were up 12 points, or 0.27 percent, on volume of 32,510 contracts. Dow e-minis were up 40 points, or 0.23 percent, with 21,538 contracts changing hands.
BP's U.S.-listed shares rose 3.3 pct to $40.55 premarket after oil and gas producer reached agreement with U.S. and affected state governments to settle damages claim from Gulf of Mexico oil spill.
HealthNet rose 16.6 percent to $75.91 after Centene Corp said it would buy the healthcare management company for an enterprise value of $6.8 billion. Centene shares rose 3.3 percent
Insurer MBIA Inc rose 6.3 percent to $6.25 after Peurto Rico's PREPA avoided default by making a $415 million payment to creditors.
Xoom Corp rose 21.3 percent to $25.11 after Paypal, the electronic payments division of eBay, said on Wednesday it would buy the digital money transfer provider for about $890 million.
Western Union fell 4.9 percent to $20.39 after Evercore ISI cut its rating on the stock to "hold" from "buy", citing the Xoom deal. (Reporting by Sweta Singh in Bengaluru; Editing by Saumyadeb Chakrabarty)