A NSW South Coast employment service provider has warned the Shoalhaven region is fostering a growing underclass of unemployed youth who do not appear in official figures.

A report from the Brotherhood of St Laurence released this week, names the Shoalhaven and Southern Highlands as a 'regional hotspot' with a youth unemployment rate of 18.4 per cent, well above the national average of 12 per cent.

But Michelle Burke from Habitat Personnel says in reality the figure would be double that, with young people often living in isolated areas where they are virtually uncontactable.

"Many of them have left school so they are disengaged with the education system, they are not on any benefit, they are often homeless — couch surfing staying where ever they can stay — and they are under the radar, nobody knows about them," she said.

Ms Burke said despite a growth in Defence-related construction jobs locally, many who turn up for work fail the drugs tests and do not have the required skills.

"So these employers have stated clearly to government [they have] little to no work ethic, they are unskilled, unwilling to learn, they have a poor attitude, they are unreliable and they are unethical," she said.

Unemployment among older workers

At the other end of the age scale, 58-year old Graham said he had unsuccessfully applied for 62 jobs since October last year.

He lost his long-standing job at the Shoalhaven Paper Mill when it closed nine months ago.

Graham retrained for work in the growing aged care sector, but found he was not suited to it.

Since then he has been on the hunt for work, but believes his age is a major turn off.

"As soon as I front up for the interview you can see they nearly turn white when I walk into the room," he said.

"They obviously think, look at this guy he's a bit old.

"They tell you that age doesn't matter, but I can tell you it does."

The Illawarra region has recently benefited from a $670,000 adjustment package for 500 retrenched steelworkers, with part of the money going to employ an Illawarra Employment Facilitator.

When the Shoalhaven Paper Mill closed in late 2015 with the loss of 75 jobs, retrenched job seekers were offered TAFE retraining courses.

Federal Liberal MP Ann Sudmalis stands by the level of government assistance offered.

"We did a huge amount of work for the workers from the paper mill," she said.

"We secured the transition program, we helped get them into their skilling program in conjunction with the State Government — that's as much as you can do and they secured a good deal from their employer.

"You can't magically create a job."

The Illawarra Business Chamber (IBC) wants more government action, especially in creating private sector jobs.

"This is very concerning, particularly when the NSW economy as a whole is powering ahead of the other states," IBC CEO Deb Murphy said.

"The fact is that young people need jobs, and the jobs of the future here in the Illawarra will come from the private sector."