Background: Negative consequences of unemployment have been known for a long time. This study concerns the effect of unemployment and job insecurity in a large sample of young adults because little is known about this special age group. Methods: 420 persons (46.8% males, 52.2% females, mean age 29 years) were polled in the 16th wave of the Sachsische Langs-schnittstudie in 2002. This longitudinal study accompanies an East German sample since 1987 i.e. some time before German reunification. We used standardised psychological questionnaires to assess the state of health (SCL-9, HADS, GBB, SWE). Results: 120 (29%) persons were repeatedly unemployed, 143 (34%) once, and only 157 (37%) have never been unemployed. The period of unemployment lasted 1 to 76 months. According to the experience with unemployment we found differences in subgroups: persons having more experience with unemployment report on higher global distress, more anxiety and depression, feel less efficacious and are in a subjectively poorer state of health. Nearly one-third of the participants think they have an insecure job. Persons who perceive an insecure job feel significantly greater anxiety, depression, body complaints, mental distress and feel less efficacious. Conclusions: Unemployment is a big social problem for young and well-qualified persons. The experience of unemployment decreases the identification with the current social system and has a strong negative influence on the state of health. Specific offers of medical and psychosocial support are required. Even the feeling of job insecurity has explicitly negative effects on health. Further longitudinal research is necessary.