* Nonfarm payrolls up by 173,000 vs 220,000 expected
* Unemployment rate falls to 5.1 percent from 5.3 percent
* Futures down: Dow 283 pts, S&P 33 pts, Nasdaq 69 pts (Adds details, comment, updates prices)
By Tanya Agrawal
Sept 4 (Reuters) - Wall Street was set to open lower on Friday as investors assessed August jobs data, which showed that fewer-than-expected jobs were added to the economy even as unemployment rate dropped to its lowest in more than seven years.
Nonfarm payrolls increased 173,000 last month after an upwardly revised 245,000 rise in July and below the 220,000 that economists polled by Reuters had expected. Unemployment rate dropped to 5.1 percent and wages accelerated.
The report underscored the U.S. economy's vibrancy in the face of volatile global financial markets and China's slowing growth, and kept alive the prospect of the U.S. Federal Reserve raising rates at its Sept. 16-17 meeting.
S&P 500 e-minis were down 32.75 points, or 1.68 percent, with 428,567 contracts traded. Nasdaq 100 e-minis were down 68.75 points, or 1.63 percent, on volume of 67,094 contracts. Dow e-minis were down 283 points, or 1.73 percent, with 50,987 contracts changing hands.
"The unemployment rate has fallen while wages have accelerated - that will certainly give the hawks more ammunition for a September rate hike," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
The August jobs data, however, has often been sharply revised upward after initial weak readings due to seasonal fluctuations.
The recent turmoil in the market has prompted some investors to bet the Fed might wait until the end of the year to hike rates.
But Fed Vice Chairman Stanley Fischer said last Friday it was still too early to decide if the volatility, which left the S&P 500 with its biggest monthly drop in three years in August, had made a September hike unfeasible.
The Fed has said it will increase rates only if it sees sustained economic recovery. While the labor market continues to gain strength, inflation stubbornly remains below the 2 percent target set by the central bank.
Separately, Richmond Fed President Jeffrey Lacker said he had seen enough healing in the U.S. labor market to warrant raising interest rates soon.
U.S. stocks mostly ended higher on Thursday in choppy trading as investors remained on edge ahead of the data.
Near-zero rates have allowed the U.S. stock market to stage a spectacular bull-run since the financial crisis. Higher interest rates increase the cost of borrowing and impact the profit margins of companies.
Caterpillar's shares were down 2.3 percent at 74.38 premarket after Baird downgraded the stock to "neutral".
Netflix was down 3 percent at $98. The stock has fallen for the past five days.
Verifone Systems was down 4.4 percent at $29.70 after the payment device maker's current-quarter forecast disappointed expectations. (Reporting by Tanya Agrawal in Bengaluru; Editing by Savio D'Souza and Saumyadeb Chakrabarty)