U.S. employers probably stopped cutting jobs and added 5,000 payrolls in January, the second monthly gain since the recession started in December 2007, the government is expected to report on Friday.

The Labor Department, however, will also say job losses during the most severe U.S. economic downturn in 70 years were deeper than initially thought.

The employment report, which contains the payrolls data and jobless rate, will be packed with revisions dating back to 2005. There will also be revisions to payroll figures between March and December last year, and analysts urged caution in interpreting the data.

To further complicate the report, January also has a large seasonal adjustment factor. January normally experiences a surge in lay-offs after the holiday-season hiring, which this year economists say may be less than usual.

We will be inclined to treat either a very strong or weak employment report -- particularly the payroll portion -- with a greater-than-usual degree of skepticism this month, said Andrew Tilton, an economist at Goldman Sachs in New York.

A Reuters survey predicted nonfarm payrolls grew 5,000 after a surprise 85,000 drop in December. Payrolls increased by 4,000 in November. The unemployment rate, however, is expected to edge up to 10.1 percent in January from 10 percent the previous month.

Job estimates vary widely, ranging from a loss of 75,000 to a gain of 100,000. A median prediction from the 20 most accurate forecasters saw payrolls unchanged last month.

With Americans increasingly anxious about double-digit unemployment, President Barack Obama has declared that job creation will be his top priority in 2010.

Obama's fellow Democrats fear voters could punish them in congressional elections due in November if the administration fails to make headway in tackling the high jobless rate.

The government has estimated that for the 12 months to March 2009, the number of people employed will be revised down by about 824,000, meaning the economy shed far more jobs than previously thought.

As such, the preliminary estimates suggest that the job cuts during the recession were even more aggressive, totaling 8.1 million, said Dean Maki, chief economist at Barclays Capital in New York.

The government will also publish revised population estimates in its smaller Household Survey, from which the unemployment rate is derived.

While this could have a large impact on the labor force and household employment, a marginal effect on the jobless rate was expected, with revisions published in the December report.

Financial markets have grown nervous about the prospect of unemployment in the United States remaining high for a long time. The economy resumed growth in the second half of 2009, but that has yet to translate into a labor market recovery.

January's report could show a rise in government employment as hiring for the 2010 Census got underway. A large seasonal adjustment could also bump up January payrolls.

Normally there is a large shedding of workers in January, but analysts reckon that after a year of extraordinary job losses, there might be fewer seasonal workers to lay off this time around.

Even if we have an increase (in payrolls), there will still be some lingering doubts given that in the last few weeks (initial jobless) claims have moved higher, that will make some people greatly concerned about the sustainability of any improvement, said Michael Feroli, an economist at JP Morgan in New York.

New applications for state unemployment benefits have trended higher in recent weeks. But some economists saw hopeful signs in robust productivity growth data on Thursday, which they said implied businesses might need to start hiring more workers soon.

(Additional reporting by Ross Colvin; Editing by Dan Grebler)

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