This paper characterizes optimal unemployment insurance over the business cycle in a model in which unemployment stems from matching frictions (in booms) and job rationing (in recessions). Job rationing introduces two effects not captured by previous studies. First, job-search efforts have little effect on aggregate unemployment because the number of jobs available is limited, independently of search and matching. Second, while job-search efforts increase the individual probability of finding a job, they create a negative externality by reducing other jobseekers' probability of finding one of the few available jobs. Both effects are captured by the positive and countercyclical wedge between micro-elasticity and macro-elasticity of unemployment with respect to net reward from work. We derive a simple optimal unemployment insurance formula expressed in terms of those two elasticities and risk aversion. The formula coincides with the classical Baily-Chetty formula only when unemployment is low, and macro- and micro-elasticity are (almost) equal. The formula implies that the generosity of unemployment insurance should be countercyclical. We illustrate this result by simulating optimal unemployment insurance over the business cycle in a dynamic stochastic general equilibrium model calibrated with US data.