Consumer sentiment rose for the second month in a row in September as inflation continues to cool.

Americans' attitude about the economy rose 3% last month compared with August, according to the latest Surveys of Consumers from the University of Michigan.

“While there are some signs that consumers perceive a slight deterioration in labor market conditions, they do not expect substantial effects on the economy,” Surveys of Consumers Chief Economist Joanne Hsu said in a statement. 

The current unemploment rate is 4.2%, according to the Bureau of Labor Statistics. While higher than the 3.8% rate one year ago, it's lower than the long-term average of 5.7%.

“Consumers recognize that labor markets have been relatively strong, and they expect that the Fed will step in to prevent unemployment rates from spinning out of control," Hsu said. "In fact, consumer expectations for the economy have been on an upswing, as they expect interest rates to continue falling in the year ahead.”

Last week, the Federal Reserve cut its benchmark interest rate by half a point in response to a softening labor market. Many economists expect the Fed will cut rates again before the end of the year.

The increase in sentiment in the latest survey was across all education groups and political affiliations. 

Expectations for the future are 13% higher than they were a year ago but are below their historical average due to persistently high prices. Elevated prices were the most common factor cited in consumers' attitudes about their personal finances, though they recognize that inflation has improved since peaking in 2022. 

Inflation is currently at 2.5% — the lowest level since February 2021, according to the Bureau of Labor Statistics.

Consumers expect inflation to continue decreasing in the coming year, the survey found. Over the next five to 10 years, more consumers also expected the economy to improve. Consumer sentiment for the long term is currently 4% above the historical average.