* U.S. jobs grew modestly in January, prior months revised higher * Yields for 10-year Treasuries find traction difficult at 2 percent * Unemployment rate edges higher to 7.9 percent By Luciana Lopez NEW YORK, Feb 1 (Reuters) - Prices for U.S. Treasuries edged up in choppy trading on Friday as data suggested the U.S. labor market was healing, albeit at a subdued pace and with unemployment still higher than policymakers would like. U.S. payrolls grew modestly in January and gains in the prior two months were bigger than initially reported, supporting views the economy's sluggish recovery was on track despite a surprise contraction in output in the final three months of 2012. "The upward revisions make this a firm report, but this month isn't that impressive with a dip in the work week, steady YoY earnings and the uptick in unemployment, which is of course what the Fed is focusing on," said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut. The Federal Reserve wants to see unemployment at 6.5 percent, with some analysts saying policy is effectively on hold until that level is reached. The Friday data showed that the unemployment rate edged up 0.1 percentage point to 7.9 percent. That gain does not come from more people entering the job market, Ader said, "so no signal of improving job confidence." While there are elements of the report to please both bulls and bears, said Rob Carnell, an economist with ING Bank, "for now, however, this is further vindication of the Fed's December QE expansion," and should help limit the testing of 10-year yields seen over recent weeks. Treasuries pared losses sharply on the data, with prices for 10- and 30-year debt jumping into positive territory, although still seesawing back and forth into losses. The 10-year Treasury note last traded up 5/32 in price to yield 1.969 percent, despite having yielded above 2 percent earlier in the session. The 10-year notes have been testing the 2 percent level all week but have found traction difficult at that level. If the yield closes above 2.01 percent, a 61.8 percent retracement of the yield's fall from 2.40 to 1.38 percent in March-July last year, that could lead to a test of resistance from its channel top around 2.08 percent, George Davis, chief technical analyst at RBC Dominion Securities, said in report. The 30-year bond last traded up 1/32 in price to yield 3.167 percent, from 3.171 percent late on Thursday.