You could also answer with "I"m not currently employed." The complete truth, but doesn't get into why you are not employed. Especially in today's economy, it wouldn't be that unusual. Or as others have said, you could reply if you are taking any classes that you are a student and what you are studying. Or that you are a homemaker (i know easier for women to say). People ask this question not to be rude, but as a conversation opener. Especially new people who don't know anything. It is easier than asking "what books do you like?" when not knowing if the person likes to read. It is a social set up, not something that is meant to make people feel bad.