* Nonfarm payrolls up by 223,000, just below the 224,000 expected
* Unemployment rate falls to lowest since May 2008
* Futures up: Dow 0.7 pct, S&P 0.7 pct, Nasdaq 0.8 pct (Adds details, updates prices)
By Tanya Agrawal
May 8 (Reuters) - Wall Street futures extended their gains on Friday after data showed U.S. job growth rebounded last month and the unemployment rate dropped, signs of a pick-up in the economy that could keep the Federal Reserve on track to hike interest rates this year.
Nonfarm payrolls increased by 223,000 in April, just below the 224,000 that economists polled by Reuters had expected.
The one-tenth of a percentage point decline in the unemployment rate to 5.4 percent, its lowest level since May 2008, came even as more people piled into the labor market.
March payrolls were revised to show only 85,000 jobs created, the smallest since June 2012.
Still, the solid report suggested underlying strength in the economy at the start of the second quarter after growth hit a soft patch at the start of the year.
"This is more evidence that the economy is expanding after its first-quarter swoon," said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Asset Management.
"Last month was an anomaly. I think we'll continue to see jobs over 200,000. This is the kind of growth we expect throughout the year."
Most of Wall Street's top banks expect the Fed to hold off until at least September before raising interest rates, based on Reuters' most recent poll.
Wall Street closed higher on Thursday as tech stocks rebounded and a global bond sell-off eased as oil prices fell more than 3 percent.
Salesforce.com fell 3.4 percent to $72 in premarket trading after Reuters reported that Microsoft was currently not weighing an offer for the cloud software company. Microsoft was up 1.5 percent at $47.42.
Nvidia fell 4.1 percent to $46.62 after it forecast lower-than-expected revenue for the second quarter.
Futures snapshot at 8:37 a.m. ET (1237 GMT)
* S&P 500 e-minis were up 14 points, or 0.67 percent, with 195,779 contracts traded.
* Nasdaq 100 e-minis were up 33.5 points, or 0.76 percent, on volume of 37,701 contracts.
* Dow e-minis were up 121 points, or 0.68 percent, with 33,610 contracts changing hands. (Additional reporting to Ryan Vlastelica; Editing by Savio D'Souza)