This article aims to test whether geographical factors have an important role in explaining ethnic inequalities in transitions between economic activities. It is based on the Office for National Statistics Longitudinal Study, which links together results from successive censuses in England for a random sample of respondents. It allows us to estimate the probability of transition into and out of employment and the labour market. Our analyses reported that ethnic minorities were, more likely than their White peers, to become unemployed and less likely to become employed. Living in a deprived neighbourhood was associated (positively) with transitions to unemployment and (negatively) with transitions to employment, especially among men. Ethnic diversity was negatively associated with job loss among employed women, but also for homemaking women and their chances of finding employment. Deprivation partially explained the ethnic minority disadvantage in the English labour market.