* May nonfarm payrolls up by 138,000 vs 185,000 expected
* Unemployment rate falls to 4.3 pct from 4.4 pct in April
* Futures up: Dow 31 pts, S&P 1.5 pts, Nasdaq 11.25 pts (Adds details, comment, updates prices)
By Tanya Agrawal
June 2 (Reuters) - U.S. stock index futures pared gains sharply after data showed job growth slowed in May, suggesting that a rebound in the labor market was losing steam.
Nonfarm payrolls increased by 138,000 last month, below the 185,000 rise expected by economists. Data for both March and April was revised to show 66,000 fewer jobs were created than previously reported.
Average hourly earnings rose 0.2 percent in May, following a similar gain in April.
However, unemployment rate fell to a 16-year low of 4.3 percent from 4.4 percent in the previous month.
While last month's job gains could still be sufficient for the Federal Reserve to raise interest rates this month, the modest increase could raise concerns about the economy's health after growth slowed in the first quarter.
"While today's pace of job gains disappointed, the unemployment rate kept drifting downward, well below its long-term level," said Thomas Julien, U.S. economist at Natixis North America.
"A hike in June is still on the table but the news flow will have to improve for the Fed to keep tightening in the second part of the year."
Odds of a rate hike at the Fed's June 13-14 meeting fell to 88.8 percent from 91.2 percent prior to the data, according to the CME Group's FedWatch tool.
Shares of banks such as Bank of America, JPMorgan , Citigroup and Goldman Sachs fell between 0.7 percent and 1.3 percent in premarket trading.
Dow e-minis were up 31 points, or 0.15 percent, with 34,727 contracts changing hands at 8:40 a.m. ET (1240 GMT).
S&P 500 e-minis were up 1.5 points, or 0.06 percent, with 223,938 contracts traded.
Nasdaq 100 e-minis were up 11.25 points, or 0.19 percent, on volume of 37,697 contracts.
U.S. stocks advanced on Thursday, with the major indexes notching record highs after strong ADP private sector employment data.
Brent oil tumbled below $50, heading for a second straight week of losses, on worries that President Donald Trump's decision to abandon a climate pact could spark more crude drilling in the United States, worsening a global glut.
Lululemon Athletica jumped 15.6 percent to $56.28 after the athletic apparel maker's quarterly profit beat estimates.
RH slumped 20.4 percent to $45.59 after the high-end furniture retailer slashed its full-year profit forecast.
Wayfair was up 3.6 percent at $68.87 after a brokerage increased its rating on the online furniture retailer's stocks. (Reporting by Tanya Agrawal; Editing by Saumyadeb Chakrabarty)