One in 10 people, aged 16-25, are said to be affected - at a time when youth unemployment is a major issue.
Youth charity The Prince's Trust interviewed more than 2,000 young people UK-wide to compile the report, which aims to gauge wellbeing across a range of areas, from family life to physical health.
"A frightening number of unemployed young people in Northern Ireland feel unable to cope - and it is particularly tough for those who don't have a support network in place," Ian Jeffers, regional director of The Prince's Trust in Northern Ireland, said.
"We know at The Prince's Trust that it is often those from the most vulnerable backgrounds who end up furthest from the job market."
Life can become a demoralising downward spiral - from a challenging childhood into life as a jobless adult.
Ian Jeffers, The Prince's Trust
The report shows that young people are more likely to be able to cope if they are in employment, education or training.
Having someone to talk to about their problems while growing up can also help - but one in six young people in Northern Ireland were found to lack that support.
According to the report, 21% of local young people feel down or depressed "always" or "often" - but the figure tends to be much higher among NEETs (those not in employment, education or training).
More than one in seven young people in Northern Ireland believe their prospects have been "permanently damaged" by the recession.
One in seven also feel they have no future due to the economic crisis.
"The Youth Index clearly shows a worrying discrepancy between young people who are in work and those who are not," Richard Parish, chief executive of the Royal Society of Public Health, said.
"These unemployed young people need support to re-gain their self-worth and, ultimately, get them back in the workplace.
"With recent record-breaking youth unemployment, the work of charities like The Prince's Trust with vulnerable young people is more critical than ever."
Last year, The Prince's Trust worked with more than 3,000 disadvantaged young people across Northern Ireland giving them the skills, confidence and motivation to move into the workplace.
More than three in four young people supported by the youth charity move into work, education or training.
"With the right support, we can help get these lives on track across the region," Ian Jeffers added.