By Sari Heidenreich

WASHINGTON (MNI) - With most analysts predicting little change - or a slight improvement -- in the U.S. employment situation Friday when the jobs report is released, one economist from the Economic Policy Institute is predicting a drop in non-farm payrolls of 20,000.

"I personally think the employment changes are going to be small but negative on the order of around 20,000 and that is based on jobless claims that were still on around 40,000 per week in January," the EPI's Heidi Shierholz said in a conference call Wednesday.

In its National Employment Report released Wednesday morning, ADP said nonfarm private employment decreased 22,000 from December 2009 to January 2010 on a seasonally adjusted basis. The estimated change of employment from November to December 2009 was revised by 23,000, from a decline of 84,000 to a decline of 61,000. The January employment decline was the smallest since employment began falling in February of 2008.

The median forecast by analysts in a Market News International survey is for no change in non-farm payrolls.

Given the assumption of modest employment losses, Shierholz expects the unemployment rate to increase from 10.0% in December to 10.1% in January.

However, she said her prediction heavily depends on what happened with the labor force in last month. She noted that December's unemployment rate remained steady at 10% because of the large number of people that exited the labor force.

"In many ways it doesn't actually matter whether employment growth is modest and positive or modest and negative, if we aren't adding jobs in a health way -- which would be at least 100,000 per month -- the unemployment rate is going to continue on an upward trend," Hierholz said.

Hierholz said the U.S. is unlikely to see job growth before the third quarter of this year, when she predicts the unemployment rate will have hit 10.5%. She projected this percentage will remain elevated for a long time.

"We need to add more than 100,000 jobs per month to start actually bring the unemployment rate down," she said.

Robert Gordon, an expert on productivity growth from Northwestern University -- also on the call -- said he does not think 100,000 will be added every month. The U.S. would be lucky to average 60,000 - 65,000 growth in payroll enrollment monthly over the next 12 months, he said.

However, Gordon said there is an ironic reason to be optimistic. Productivity growth is not as high as it was in 2002-2003, he said, which allows employment to grow more rapidly.

"In the year 2010 we may have labor productivity growth for the total economy as high as 3%," Gordon said. "That leaves room for labor to grow by only 1-1.5%. Since we have such a huge number of people being forced to work part-time the easiest way for firms to adjust to an increased demand is to put part-time workers back in full-time, not to hire new workers."

Conversely, given the proximity to the 2012 presidential campaign, Gordon said there is a possibility for output to grow at 4% and labor productivity to decrease to 2% in 2011. This would allow employment to grow by maybe 1.25% and for the unemployment rate to fall.

Gordon predicted unemployment to be in the range of the high 9% by the time of the congressional elections this Fall and around the high 8% in the fourth quarter of 2011.

** Market News International Washington Bureau: 202-371-2121 **