Longitudinal observations are reported on 4 groups of young people, defined by their employment status on 2 occasions after leaving school. Questionnaires were administered to them in 1980 while they were at school and then again after intervals of 2 and 3 years when they were all in the labor force. Clear differences were observed between the unemployed and employed groups after the longer interval that were not apparent after the shorter interval. The unemployed showed lower self-esteem and greater depressive affect, negative mood, and externality in locus of control than the employed. The unemployed showed no deterioration on any of the measures since they were in school, but the employed showed an improvement. These results imply that although gaining employment produces an improvement in psychological well-being in school leavers, unemployment does not have the opposite effect. The clear differences observed after 3 years that were not apparent after 2 suggest that longitudinal observations after longer intervals may show evidence of deterioration in the unemployed.