This study examines the interplay of unemployment stress, trait anxiety and physical exercise in the development of physical health. Longitudinal data were taken from a sample of East German migrants (N = 330) who were confronted with the potentially stressful demand of finding a job in the Western society. Unemployment stress was found to exert a main effect on illness level. Trait anxiety was a moderator of the stress-illness relationship, but exercise was not. As indicated by a three-way interaction involving exercise, anxiety, and stress, exercise was most beneficial among high-anxious subjects who were not exposed to unemployment stress. Results of this study suggest that exercise may not buffer the deleterious effects of stressful situational conditions (unemployment), but may effectively mitigate the health-damaging consequences of lacking personal resources, such as high dispositional anxiety.