* May nonfarm payrolls up by 38,000 vs. 164,000 expected
* Smallest gain in nearly six years
* Unemployment rate at 4.7 pct
* Futures down: Dow 44 pts, S&P 6.25 pts, Nasdaq 10.75 pts (Adds details, comment, updates prices)
By Tanya Agrawal and Yashaswini Swamynathan
June 3 (Reuters) - Wall Street was set to open lower on Friday after much weaker-than-expected jobs data for May that pointed to labor market weakness and raised doubts if the economy was healthy enough to absorb an interest rate hike in the coming months.
The Labor Department said nonfarm payrolls increased by only 38,000 last month, the smallest gain since September 2010 and well below economists’ forecast of 164,000.
The jobless rate fell three-tenths of a percentage point to 4.7 percent, the lowest since November 2007. The decrease was in part due to a people dropping out of the labor force.
Traders are now pricing in only a 6 percent chance of the Federal Reserve increasing rates in June, from a 20 percent probability just before the payrolls data, according to CME Group’s FedWatch program.
“It’s a fairly disastrous payroll report,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.
“June’s definitely off the table. The Fed will definitely want to see a cleaner read on payrolls before taking rates higher again.”
Dow e-minis were down 44 points, or 0.25 percent at 8:38 a.m. ET (1238 GMT), with 24,165 contracts changing hands.
S&P 500 e-minis were down 6.25 points, or 0.3 percent, with 180,309 contracts traded.
Nasdaq 100 e-minis were down 10.75 points, or 0.24 percent, on volume of 22,749 contracts.
In recent weeks global markets have been puzzling over what the Fed will do in the near term as relatively upbeat U.S. data have been eclipsed by a still-sluggish global economy and worries over the risk of Britain exiting the European Union.
The S&P 500 ended at its highest closing level in seven months on Thursday, helped by a rise in healthcare stocks and a recovery in oil prices.
Ambarella was up 8.4 percent at $46.06 premarket after the chipmaker’s quarterly results beat estimates. GoPro , which uses Ambarella’s chips in its cameras, was up nearly 4 percent at $11.14.
Broadcom rose 7.6 percent to $166.75 after the chipmaker reported better-than-expected second quarter profit and revenue. (Reporting by Tanya Agrawal and Yashaswini Swamynathan in Bengaluru; Editing by Savio D‘Souza)