Over the past few years, research from several countries has demonstrated an association between unemployment and poor health. In addition, a number of studies have established a link between physical activity level and health. As yet, however, there has been no comparison of the physical activity levels of the employed and the unemployed in a national population and of the extent to which the health of the employed and unemployed varies with physical activity levels. The research presented in this article demonstrates that in Canada, while the unemployed report comparable levels of physical activity to the employed, for all levels of physical activity, they are less healthy than the employed, even after adjustments are made for age, gender and adequacy of family income. The effects of unemployment on health, however, vary by duration of employment. Overall, the findings suggest that some benefits of elevated levels of physical activity are dampened by the consequences of unemployment.