A sheltered sector is a sector that faces relatively weak foreign competition. Often this concerns services that are hard to export, like a haircut or the service in a restaurant. In theory you could travel to get these services, and for star restaurants this happens, but often that is too expensive. Production of goods competes relatively more with abroad because most goods can be transported at relatively low costs to the consumer.
Construction and real estate can be seen as sheltered sectors. Construction has a high labor intensity and a large portion of the value added is created at the construction site. While construction materials can be transported relatively easily from abroad, and construction workers, albeit more difficult, can move to work elsewhere, it is not easy (yet) to import a complete building.
Domestic circumstances a strong influence
Being a sheltered sector means that if domestic demand rises for that sector’s goods or services that also means that employment in that sector rises. Leakage is low: only a small portion of the extra demand leaks abroad through imports.
A sheltered sector does not face much foreign competition, but also hardly profits from (higher) foreign demand. Demand shocks on the domestic market have a strong and direct impact on a sheltered sector. In most markets for goods this pressure would be lowered by imports or exports, but for goods and services of a sheltered that is not an option.
Lower demand in a sheltered sector initially leads to sharp price drops (and bankruptcies) en in the long run to lower employment in the sheltered sector. Higher demand initially leads to strong price rises and in the long run to higher employment in the sheltered sector.