The economy added 192,000 jobs last month, with factories, professional and business services, education and health care among those expanding the fastest.
The nationwide unemployment rate has been falling for three months now. It was nearly 10 percent in November.
The unemployment picture's not as bright in California, where the jobless rate dipped slightly in January.
In Los Angeles County, the unemployment rate increased.
There is not much to celebrate in the new numbers from California: 2.2 million Californians are still out of work. But a reversal in the jobless rate is a good way to start the new year. How it ends may depend on the state budget.
If California is in a "U"-shaped recession, perhaps this is a sign things may be on an up-trend.
For the last four months of last year, the state's unemployment rate would not budge from a recession high of 12.5 percent. New numbers out for January show that ticked down to 12.4 percent.
"Now what we really need to see are some these job gains and we've had four straight months of job gains. That's an important trend. Now what we need to see is that solidify and grow even stronger in the months ahead," said Loree Levy, California Employment Development Department (EDD).
Joseph Freeman has been looking for work for nearly a year now. The unemployed purchasing agent is taking classes to improve his skills. He's happy the jobless rate is lower, but discouraged at the same time.
"Any drop is good," said Freeman. "That just means some people have hired a little bit. But I don't think it really affects people like me who are on the bottom looking up."
EDD also reviewed last year's trends.
While the state saw construction jobs evaporate during the recession, 2010 saw more job losses in government than in construction. Roughly 51,000 jobs lost in government, about half that in construction.
"Government has replaced construction as the big drain on the economy," said Levy. "It really is reflective of the very tough budgetary times we face and that's created some very tough decisions on a localized level, as well as in state government."
The public sector may continue to drag California recovery, as all levels of government still have to deal with shrinking tax revenue.
A record 30,000 pink slips may to go out to public school teachers by March 15 because districts are uncertain of funding.
"It's going to be pretty devastating. So people need to think about what is that economic impact of the public sector workforce on California. And it's pretty significant," said Kevin Gordon, a public schools lobbyist.
Governor Jerry Brown hopes to put a proposal on a June ballot that would ask Californians to pay a higher sales, income and car tax rate for five more years to save those jobs.