Typically when people got laid off, they feel shamed and don't know how to update their LinkedIn profile. But the best way is to as soon as possible broadcast the new job status to the world. Basically if you want to find another position, that's precisely what you should do.
In the current bad economy in USA, with so many talented people being let go, there is absolutely no shame in clearly indicating that you don't have a job. You would actually gather confidence by being open that you are between jobs, and LinkedIn is a valuable tool to help you spread the word.
These days LinkedIn has become a valuable tool for hiring managers and people conducting interviews to look up a candidate's background information. So if you are out of work, it is very important to develop a robust, 100% complete LinkedIn profile. Also, In creating a new profile or editing your current one, be very public about the fact that you're looking for new opportunities.
Here are some tips on how to update your LinkedIn profile in case of a layoff.
Give a generic description of what you do or a sample job title (for example, Senior Software Engineer). Label yourself as what you would like to be, rather than feeling limited by what your last job title was.
Because you are now inbetween jobs, the "Current" heading should be deleted. Before you do that, though, cut and paste your previous company and job title into the "Past" section. Then click "edit" and "delete," and make the "Current" heading disappear. Don't be concerned that your job shows an end date. It's very acceptable to be in between jobs.
In a couple of short paragraphs, emphasize your key skills and examples of accomplishments. Conclude with a sentence that says "I am currently looking for new opportunities in a couple of specific functions and industries."
Remember, both headhunters and company hiring managers look for people who are currently out of work, because it saves them the trouble of having to convince someone who is currently employed to switch jobs. So it's to your advantage to indicate that you're open to new opportunities.
For example, someone who previously worked as a senior software engineer could write, "Actively pursuing senior software engineer or web developer role in a dynamic, collaborative environment". Or an experienced web developer looking to reposition his career into marketing could say something like, "Currently seeking to leverage my web development experience and education into Internet marketing". Alternatively, you can put "Actively seeking new opportunities" in your professional headline.
Make sure your descriptions of past jobs adequately convey what you did. Standard rules of thumb are: use active verbs, amply convey your responsibilities, and show results. Get recommendations from your current or most relevant jobs that reflect varying perspectives -- for example from a manager, a colleague and a client.
A typical question is whether people should include graduation dates which would reveal their age. In this case, it is best to not hide the age, because it could be useful as to who you could connect with.
Finally, make sure that you keep editing your profile until LinkedIn tells you it is 100% complete.