* U.S. economy adds 223,000 jobs in May vs est. 188,000
* Unemployment rate falls to 3.8 pct
* Costco down after results
* Futures up: Dow 0.66 pct, S&P 0.55 pct, Nasdaq 0.47 pct (Adds comment, details; updates prices)
By Medha Singh
June 1 (Reuters) - Wall Street was set to open higher on Friday as Italy's political crisis subsided, while investors assessed a stronger-than-expected U.S. jobs report.
Nonfarm payrolls increased by 223,000 jobs in May, the Labor Department said, while the average hourly earnings rose 0.3 percent after edging up 0.1 percent in April.
Economists polled by Reuters had forecast jobs increasing by 188,000 jobs and a 0.2 percent rise in wages.
The numbers cemented expectations that the Federal Reserve will raise interest rates in June, as the unemployment rate dropped to an 18-year low of 3.8 percent, pointing to rapidly tightening labor market conditions.
U.S. equity futures pulled back slightly before rising higher, with shares of big U.S. banks gaining between 1.2 percent and 1.6 percent.
"The really good news for markets is the average hourly earnings continues to be very steady and does not signal a buildup in inflationary pressures, so overall a very solid report," said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
Markets got a reprieve overnight as Italy's anti-establishment parties revived coalition plans, removing the risk of a repeat vote dominated by debate over the country's future in the euro zone.
However, investors are keeping an eye out on developments around trade after Washington on Thursday imposed steel and aluminum tariffs on Canada, Mexico and EU.
Canada and Mexico hit back on Thursday with duties on U.S. goods ranging from orange juice to pork and the European Union was looking to tax bourbon whiskey and Harley motorcycles after on the countries.
At 8:57 a.m. ET, Dow e-minis were up 161 points, or 0.66 percent. S&P 500 e-minis were up 15 points, or 0.55 percent and Nasdaq 100 e-minis were up 33 points, or 0.47 percent.
Among stocks, warehouse club operator Costco fell 1.9 percent in premarket trade as higher freight costs dented its quarterly gross margins. (Reporting by Medha Singh in Bengaluru)