The federal government has announced that it will not be renewing the contract with an arm of Youthworks responsible for helping unemployed Australians back into the workforce.

The Community Work Co-ordination (CWC) division has been organising pre-employment placements for the long-term unemployed for more than a decade.

Youthwork's has described the decision as a great surprise and a huge blow for CWC workers.

"Our aim is to see people restored, socially and spiritually," says team leader Naomi Green.

"The biggest joy in my job is to be able to sit them down and apply the skills God has given me to minister to them."

But the ability to continue this service is now in doubt with Youthworks unlikely to be able to afford to fund the service beyond September when the current federal contract expires.

The loss of the scheme will also have an impact on church projects which benefited from the low-cost assistance CWC could provide.

Clients participated in the recent renovation and heritage restoration of Golden Grove, the cathedral's healing service centre in Newtown.

Ms Green believes the decision will come as a real blow to Sydneysiders already struggling to find their way in the community.

"People out of work feel absolutely isolated and lacking in self-esteem," she says.

"God has used Youthworks CWC to be a real help to people. Now the government will close down the funding and we cannot continue the service."

Ms Green and her team, including Margaret Southwell and Baher Shenouda, have been able to provide numerous unemployed people work experience with Christian organisations.

Their involvement with the church at this level has often had a transforming effect on their attitude to Christ.

"For example St Andrew's at Bondi Beach run an outreach bookshop-style café. We supply the people to serve," Ms Green says.

"Some have enrolled into Christian courses and attend church. The chef, Chris, was one of our placements."

Other organisations to benefit from the Youthworks program include the Maritime Museum where CWC clients have worked on the James Craig restoration project.