Background. The aims of this study were to examine the associations between exposure to unemployment following school leaving and rates of psychiatric disorder using data gathered on a birth cohort of New Zealand young people studied up to the age of 18.

Methods. At age 18 cohort members were assessed on: (a) duration of exposure to unemployment from age 16; (b) DSM-IV diagnostic criteria for major depression, anxiety disorders, conduct disorder, nicotine dependence, other substance abuse/dependence and attempted suicide. This information was integrated into longitudinal data gathered on the social circumstances, family background and adjustment of the cohort up to the age of 18.

Results. Increasing exposure to unemployment was associated with increasing risks of psychiatric disorder in adolescence. Those exposed to 6 months or more unemployment had rates of disorder that were 1·5 to 5·4 times higher than those not exposed to unemployment. However, most of the elevated risk of disorder among those unemployed was explained by family and personal factors that were present prior to school leaving age. Nonetheless, even after control for these factors those exposed to unemployment had significantly higher rates of anxiety disorder and substance use disorders.

Conclusions. To a large extent the relationships between unemployment and psychiatric disorder seen in this cohort were explained by social, family and personal factors that were present before school leaving age. Nonetheless, young people exposed to unemployment had higher rates of substance use and anxiety disorder.