NEW YORK (Reuters) - The U.S. Federal Reserve said on Monday that its index on labor market conditions fell to its lowest level since May 2009, reinforcing a perception of slowing job growth following last week's stunningly weak payrolls report.

The central bank's labor market conditions index, which has declined for seven straight months, fell to -4.8 in May from -3.4 in April. The April figure was initially reported at -0.9.

Last Friday, the Labor Department said U.S. employers added 38,000 workers in May, the fewest since September 2010. The increase fell far short of the 164,000 forecast of economists polled by Reuters.

The smaller-than-expected rise in nonfarm payrolls resulted in traders scaling back their expectations that the Fed would raise interest rates soon.

U.S. interest rates futures implied traders saw a 6 percent chance the central bank would raise interest rates at its policy next week <FFM6>, up slightly from 4 percent on Friday, according to CME Group's FedWatch program.

Traders expected the Fed would consider November as the earliest it would hike rates.

(Reporting by Richard Leong; Editing by W Simon and Bernadette Baum)