Hopefully it never happens to anyone but I have asked this from many people and nobody had a definite answer... and I am asking about the U.S.A and software developer positions:
Let's say your employer says you don't have enough skills, don't perform well, etc and fires you. So does it show on your records when you go to interview and get a job with other companies? If you don't apply for unemployment benefits it won't show - if it does at all - ?
The reason for firing won't show on your records unless the prospective employer contacts the previous employer and they feel like answering. Claiming unemployment benefits likewise isn't visible to anyone, as far as I know.
However, a period of unemployment will be visible as a gap in your resume.
Being out of work for a short time happens to many people and isn't, by itself, a major problem. If you've got a good answer for the question of why you lost the previous job, and what you've been doing while unemployed (especially if you've been investing in improving your skills), it's unlikely to provoke much more than those questions.
If you've been out of work for an extended time, there's a certain amount of "why didn't anyone else hire this person before they interviewed with us?" that can settle in. So, yes, the longer you're out of work the harder it may become to get hired again. The best answer to that, as suggested above, is to be able to show that you've been using the break productively.
Not having a current job is a immediate red flag when looking over prospects to hire. That is not to say there can't be good answer to this when asked, but it will be a issue that has to be answered, and the answer has to be satisfactory, for the hiring process to proceed.
For example, a good answer is that your company got bought, the new owner closed the plant, and you didn't want to move 1000 miles to where your job was now available. OK, that happens and is easy enough to verify. A bad answer is your company had a 15% layoff. That means you were dead wood they took the opportunity to get rid of, not the 85% they decided to keep. Unless your whole group got disbanded, or something similar, that's a long-lasting stain on your resume. That may seem unfair to you, but it isn't. After all, you were the dead wood they didn't want to keep. That's a solid warning to other employers they might run into the same situation with you.
The real problem is that while you may have a good explanation, you might not get the opportunity to present it. Think of someone low in the HR hierarchy that just got 100 resumes dumped on them and told to weed it down to a 10 or less. They probably don't really understand the position to be filled, and don't understand how to interpret details for that type of a position on a resume. They are looking for any excuse at all to toss one more resume in the circular bin to just get thru this task. Tossing the losers who don't currently have a job is a simple expedient. Sure, that may not be the best for the company, and yes it's unfair, but it is exactly what happens all too often.
Therefore if you're currently unemployed, explain in the cover letter exactly why you are no longer at the previous job. Of course this needs to be brief, no more than two sentences. One-paragraph cover letters will generaly get read. Anything more than that, and the low level HR lacky will think screw this to himself and your case will never be made.
Again though, it's always better to look for the next job while still having the current job.
Information about circumstances of losing a job can go from these separate sources:
In most companies, HR (if requested in writing) will release only date of start and end of work, and your title. They do it for lawyer's reasons: not to be sued by former employee. You can bet that it happened.
Even if company considers hiring a certain person a mistake (and that person is marked "do not rehire"), they have no reason to share that information with other companies (because other company may save money by not repeating same mistake, but for original company releasing anything above dates has only downside: risk to be sued). So you have nothing to worry from HR.
Manager, if he has time to talk to recruiters and HR of your new company, may release more information, but they are also trained to not to badmouth former employees. It is trivial to ask your friend to pretend to be a recruiter and call up your manager to ask about your job performance (and sue the company if you think you may win the case).
You pick references yourself. Do it wisely. Your reference from your former job can be someone who worked for you (and was happy with the work you did), even if your immediate manager was not. There is plenty of resources on exchange about managing (and not overusing their time) your references, reminding them what you did etc.
So it is back to you.
You need to be clear why you lost your job. Was it personality mismatch? Move following your spouse? Technology they used or switched to was not what you think about your career should be?
Every company thinks that their technology is better than others.
New company is very interested what you learned and what you plan to do so this time it will be different. Small teams fit better your personality? Big company has more resources for training and tuition reimbursement? Waterfall process in big company is too confusing, you want something more agile? Startup allows you to have more hands-on experience?
Make sure that new company can provide what you missed in previous position. (Ie don't expect tuition reimbursement from a startup.) They are as interested of hiring someone who will fit into new position and prosper in it, as you are interested in finding a job. Hiring process is costly, they want to avoid unnecessary costs.
But of course as others said, not having currently a job is red flag. Having any temporary project is better than none. But not having a job, and not knowing why you lost previous and how you plan to succeed in new job is deadly.
