This study was conducted over an extreme recessionary period for Arizona?s economy. The high unemployment rate caused a severe drain on the state?s UI trust fund. In the Tuscon SMSA nearly $26 million (in 1975 dollars) in regular states UI benefits were paid out during the period 1975-76, while only a little over $11 million was collected in UI tax contributions from local employers during this period. Any effects of the state UI system on the local economy should be most apparent during such a period. Over simulation revealed a very definite impact of regular state UI benefit payments on Tucson?s economy. These effects include UI induced changes in sales, sales tax revenues, disposable personal income, employment, unemployment, labor force, and population size. While in some instances the effects of UI benefits are sizable in absolute terms, these effects are always small in terms of percentage effects. This result is not surprising in the light of the condition under which the simulation was conducted.