In science and in society at large, there is a big debate going on about the existence and potential impact of ‘neighbourhood effects’. The dominant question is: does the social composition of the neighbourhood have specific positive or negative effects on the career prospects of those who are living there? We seek to contribute to this debate by investigating the relationship between individual social mobility and the social composition of the residential environment. For that purpose we analysed new longitudinal Swedish data, which is available at the individual level. We particularly focused our attention on the employment careers of individuals in relation to the levels of employment or unemployment in their individual environments. Environment effects on social mobility were isolated, controlling for relevant variables that were available at the individual level. We were also able to control for changes in the environments over time. Individual longitudinal data could be used over the period 1991–9. The analyses revealed that their environment appears to have a moderate yet clear impact on the employment prospects of unemployed individuals. The academic relevance of the article is in its contribution to the theoretical underpinnings of the human–environment relationship; the societal relevance is to the area‐based policies and the housing policies aimed at social mixing, which are currently being developed in many places in the Western world.