US factories posted fastest growth last month in 2 years

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a research note that ISM's January numbers are "consistent with a clear and robust acceleration in manufacturing output."

Factories have been expanding despite a strong U.S. dollar, which makes American products more expensive in overseas markets.

Overall, Labor reported that factories cut 45,000 jobs in 2016, the first annual drop in manufacturing employment since the recession year 2009.