* July nonfarm payrolls up by 209,000 vs. est. 183,000
* Average hourly earnings rise 0.3 pct, in line with est.
* Unemployment rate falls to 4.3 pct from 4.4 pct in June
* Indexes up: Dow 0.14 pct, S&P 0.10 pct, Nasdaq 0.05 pct (Updates to early afternoon)
Aug 4 (Reuters) - U.S. stocks pared gains to trade slightly up in early afternoon trading on Friday, with the Dow on track to close higher for the ninth straight day after data showed U.S. employers hired more workers than expected in July.
The Labor Department report showed nonfarm payrolls increased by 209,000 jobs last month, above the 183,000 rise expected by economists polled by Reuters.
June's employment gain was revised up to 231,000 from the previously reported 222,000.
Average hourly earnings rose 0.3 percent after gaining 0.2 percent in June, while the unemployment rate fell to 4.3 percent.
The strong jobs report is likely to clear the way for the Federal Reserve to announce a plan to start shrinking its $4.5 trillion bond portfolio in September, and could strengthen its case to raise rates for the third time this year in December.
Chances of a rate hike by the end of the year increased to 50 percent from 46 percent after the release of the data, according to CME Group's FedWatch tool.
"It's encouraging to see average hourly earnings come in line after falling the previous month," said Eric Wiegand, senior portfolio manager at U.S. Bank Private Client Reserve.
"I do think it (validates the Fed). Our expectations continue to be that we'll see a measured, moderate, deliberate reduction of the balance sheet and we're likely to see one more rate hike in the latter part of the year."
At 12:42 p.m. ET (1642 GMT), the Dow Jones Industrial Average was up 30.64 points, or 0.14 percent, at 22,056.74 and the S&P 500 was up 2.52 points, or 0.10 percent, at 2,474.68.
The Nasdaq Composite was up 3.21 points, or 0.05 percent, at 6,343.55.
Five of the 11 major S&P sectors were higher, with the financial index's 0.88 percent rise leading the advancers.
Utilities, healthcare and consumer discretionary sectors topped the list of decliners.
Walt Disney was down 1.31 percent and was the biggest drag on the Dow and the S&P.
Gilead's 1.86 percent fall and Allergan's 3.36 percent loss weighed on the healthcare index.
Viacom slumped 10.32 percent after the company forecast a low single-digit dip in sales.
Yelp jumped 27.32 percent after the company said it would sell its Eat24 business to Grubhub for $287.5 million and reported a better-than-expected quarterly revenue. Grubhub was up 9.06 percent.
Advancing issues outnumbered decliners on the NYSE by 1,571 to 1,244. On the Nasdaq, 1,625 issues rose and 1,194 fell. (Reporting by Tanya Agrawal in Bengaluru; Editing by Anil D'Silva)