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UPDATE 4-U.S. Senate talks advance as government workers stay home

(Adds McConnell, Nelson, Graham, federal workers stay home)

WASHINGTON, Jan 22 (Reuters) - Tens of thousands of federal workers shut down operations on Monday with the U.S. government closed for a third day, as lawmakers appeared to make progress in negotiating a deal before the Senate planned another vote to end the crisis.

On the first weekday since the shutdown began at midnight Friday, U.S. senators were to vote on Monday on a funding bill to get the lights back on in Washington and across the government until Feb. 8.

Republicans and Democrats spent the weekend trying to strike a deal, only to go home for the night short of an agreement.

Several lawmakers emerging from meetings about the shutdown on Monday said they were increasingly hopeful of a deal.

The U.S. government cannot fully operate without funding bills that are voted in Congress regularly. Washington has been hampered by frequent threats of a shutdown in recent years as the two parties fight over spending, immigration and other issues. The last U.S. government shutdown was in 2013.

This time around, Democrats want any short-term spending legislation to include protections for young undocumented immigrants known as "Dreamers." Republicans in turn say they will not negotiate on immigration until Democrats gave them the votes needed to reopen the government.

Many federal workers stayed home but federal government operations varied from agency to agency, with a number of critical functions continuing. The shutdown will not interrupt combat operations in Afghanistan and other military activities, the Defense Department said, and federal law enforcement officers remained on duty.

The 17 Washington area museums in the Smithsonian network are open despite the shutdown, although their plans are unclear for Tuesday. The National Zoo, which is part of the Smithsonian, also remained open on Monday.

A group of bipartisan senators meeting at the Capitol said they made progress but some senators wanted a firmer commitment from Senate Majority Leader Mitch McConnell, a Republican, on protecting "Dreamers," and on other issues.

"So some Democrats have to convince Mitch McConnell: stronger language results in an outcome, said Republican Senator Lindsey Graham.

As the meeting broke up, McConnell told the Senate he hoped bipartisan agreement could be reached on issues such as military spending, immigration and border security before Feb. 8.

If not, he reiterated a pledge to take up legislation that would address the fate of illegal immigrants brought to the United States as children, border security and related issues - if the government remains open.

"We need to move forward. And the first step, the very first step, is ending the shutdown," he said.

The Senate recessed before the scheduled vote and Democratic leaders huddled with their members, some of whom sounded pleased with McConnell's words.

"Things are moving in the right direction," said Democratic Senator Bill Nelson. "I am seeing a pathway forward that is enormously smoother based on the statement the majority leader just made."

Earlier, White House legislative director Marc Short told the Fox Business Network he did not believe the Senate would get the 60 votes needed to move on legislation that would reopen government on Monday.

WORKERS STAY HOME

At the Commerce Department, about 6,300 workers out of 47,800 were on duty. The Department of Health and Human Services said half of its 82,000 employees were on unpaid leave.

Hundreds of thousands of federal employees received notices on Saturday about whether they were exempt from the shutdown, White House budget director Mick Mulvaney said.

Depending on their schedules, some were told to stay home or to go to work for up to four hours on Monday to shut their operation, then go home. None will get paid.

U.S. cybersecurity functions were continuing, Mulvaney said, and CIA Director Mike Pompeo told the CBS "This Morning" program agency employees would continue "crushing" adversaries.

Markets have absorbed the shutdown drama over the last week, and on Monday morning world stocks and U.S. bond markets largely shrugged off Washington's standoff even as the dollar continued its pullback. U.S. stocks were higher, the dollar was slightly lower and benchmark treasuries yields were off highs of the day.

President Donald Trump continued blaming Democrats for the funding lapse, citing their demand that protections for young illegal immigrants be included in any deal.

"The Democrats are turning down services and security for citizens in favor of services and security for non-citizens. Not good," the Republican president said on Twitter.

Democrats have accused Trump of backing out of a number of deals after pressure from immigration hard-liners. The president has not appeared in public since the shutdown began.

During the last shutdown in 2013, about 800,000 federal workers were put on furlough.

Republicans control both the House of Representatives and the Senate, where they have a slim 51-49 majority. But most legislation requires 60 Senate votes to pass, giving Democrats leverage.

(Additional reporting David Morgan, Ginger Gibson, Susan Heavey, Diane Bartz, Megan Davies, Lucia Mutikani, Yasmeen Abdutaleb; Writing by Doina Chiacu; Editing by Jeffrey Benkoe and Alistair Bell)