Purpose The purpose of this paper is to test the gain and loss cycle ideas from the Conservation of Resources (COR) theory with regard to perceived employability and psychological functioning among employed workers and unemployed job seekers, respectively." "Design/methodology/approach More specifically, the authors argue that perceived employability may trigger a gain cycle toward well–being among employed workers (H1), while ill–being may trigger a loss cycle toward reduced (perceived) employability among unemployed job seekers (H2). The authors test these ideas with cross–lagged analysis." Findings Results confirm the hypotheses: perceived employability at Time 1 positively affects well–being at Time 2 among employed workers and ill–being at Time 1 negatively impacts perceived employability at Time 2 among unemployed job seekers. Research limitations/implications Future research should study the gain and loss cycles with more than two waves of data as this allows for a more adequate test of these ideas.