The Institute for Supply Management said Wednesday its service sector index rose to 50.5 last month from a revised 49.8 in December.
Any reading above 50 signals growth. Economists polled by Thomson Reuters had expected a reading of 51.
The group's employment index showed job losses moderating. It improved to 44.6 in January from 43.6 in December.
The service-sector gauge is closely watched because service jobs comprise more than 80 percent of non-farm U.S. employment.
The service sector is highly dependent on consumer spending, which powers about 70 percent of the economy.