* 151,000 jobs added in August vs est. 180,000
* Unemployment rate unchanged at 4.9 pct
* Broadcom falls; weighs the most on S&P, Nasdaq
* Indexes up: Dow 0.23 pct, S&P 0.24 pct, Nasdaq 0.22 pct (Updates to early afternoon)
By Tanya Agrawal
Sept 2 (Reuters) - Wall Street pared gains in early afternoon trading on Friday as investors feared the weaker-than-expected August employment report will not be enough to dissuade the Federal Reserve from raising interest rates as soon as this month.
U.S. nonfarm payrolls rose by 151,000 jobs in August after an upwardly revised 275,000 increase in July, with job cuts in manufacturing and construction, the Labor Department said. Economists polled by Reuters had forecast payrolls rising 180,000 last month. mixed jobs report puts the Fed in a tricky situation," said Mohamed El-Erian, chief economic adviser at Allianz (DE:ALVG) in Newport Beach, California.
"It's not all around strong enough to assure a September interest rate hike. But it's solid enough to engender a heated policy discussion, especially given the unintended consequences and collateral damage of a prolonged period of ultra low interest rates."
Traders saw a 27 percent probability of a Fed rate hike this month, higher than the 24 percent chance on Thursday, according to CME Group's (NASDAQ:CME) FedWatch program.
The odds for a December rate hike stood at 56 percent.
The U.S. economy appears strong enough to warrant significantly higher interest rates, Richmond Federal Reserve Bank President Jeffrey Lacker said on Friday. Lacker argued that a range of economic analysis suggests the Fed's benchmark overnight interest rate is too low. hike probabilities for September and December had risen after last Friday's remarks by Fed Chair Janet Yellen that the case for raising rates had strengthened in recent months. The Fed next meets on Sept. 20-21.
With the labor market near full employment, a slowdown in job growth is normal. Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with population growth.
The dollar index .DXY , which measures the greenback against a basket of six major currencies, recovered from a one-week low to trade up 0.20 percent.
At 12:48 p.m. ET (1648 GMT), the Dow Jones industrial average .DJI was up 43.01 points, or 0.23 percent, at 18,462.31, the S&P 500 .SPX was up 5.17 points, or 0.24 percent, at 2,176.03 and the Nasdaq Composite .IXIC was up 11.39 points, or 0.22 percent, at 5,238.60.
Nine of the 10 major S&P sectors were higher, with the energy index's .SPNY 0.99 percent rise leading the advancers.
Oil prices rose 3 percent, but crude futures remained on track for a big weekly loss on glut concerns. O/R
Lululemon Athletica LULU.O shares were down 8.6 percent at $70.04 after the Canadian yoga wear retailer reported quarterly comparable-sales growth below expectations. AVGO.O fell 2.37 percent to $172.90 after the chipmaker's revenue in its largest segment stalled in the latest quarter. The stock was the biggest drag on the S&P and the Nasdaq.
Smith & Wesson SWHC.O was down 6.1 percent at $27.78 after brokerage Craig Hallum downgraded the gun maker. Sturm Ruger RGR.N was also down 2.4 percent at $60.68.
Advancing issues outnumbered decliners on the NYSE by 2,249 to 666. On the Nasdaq, 1,772 issues rose and 952 fell.
The S&P 500 index showed 36 new 52-week highs and two new lows, while the Nasdaq recorded 124 new highs and 13 new lows.