When a person takes a job as a contractor, be it for the government or for a private employer, he is generally hired to do a job for a preset period of time and is never a full employee of the organization. However, the term "contractor" is often used in situations in which the person actually is a full-time employee. If the person is a true employee, then he is eligible for unemployment benefits when fired.
Unemployment benefits are generally only available to workers who have been terminated from a full-time job -- or sometimes a part-time job -- against their will. Workers who voluntarily quit or who are hired to perform a limited task for a finite period of time -- contractors -- are not eligible. However, each state categorizes contractors differently, meaning some "contractors" may be considered employees.
A contract job is a job in which a person is not hired for an indefinite period of time and in which he does not become a full employee of the company -- one who receive benefits or other compensation provided exclusively to employees. Performing a contract job for the government can last from a single day to several years. Therefore, it can be difficult to determine if you are a full employee or not.
1099 Versus W-2
Although each state has its own rules regarding who is an employee and who can get unemployment benefits, a good rule of thumb is that workers paid with a 1099 form are not eligible for benefits, while workers paid with a W-2 form are. This is because 1099 forms are designed for contractors, while W-2 forms, in which taxes are withheld, are provided for employees.
Because each state has its own laws regarding the provision of unemployment benefits, the only way to determine for sure whether you're eligible for unemployment benefits is by contacting an expert on your state laws. This can be a local employment lawyer, an employment agency or your state's department of labor. They should be able to look at your specific situation and render a definitive verdict on your eligibility.