JERUSALEM -- At first glance, the early-morning scene at Damascus Gate looks normal. This spot, just over the line in Arab East Jerusalem, is what Israelis call "a slave market" -- a place to pick up a car- or truckload of Arabs for a day's cheap labor.
At 6 a.m. the sidewalk is filled, as ever, with clusters of Arab men, smoking cigarettes and sipping tea or sweet Turkish coffee. But something is missing: the Israelis. From 6 to 8 a.m., only four Israeli cars pull up.
By 8:30, many of the Arabs are heading home, having failed again to find work at $25 a day. What is happening to the Arab labor pools is symptomatic of a broader new reality. Angered and frightened by Palestinian support of Iraq's Saddam Hussein and by a wave of stabbing attacks on Jews, Israelis are increasingly speaking of somehow divorcing themselves from the 1.75 million Palestinians who live in the West Bank and Gaza Strip. The labor market has become the testing field for flirting with separation.
For a month now, government labor inspectors have been raiding businesses, sometimes in pre-dawn sweeps, hunting for any of the 70,000 Palestinians who work in Israel illegally every day. The government wants to make it clear: The illegal workers who pour Israeli concrete, wash Israeli dishes and pick Israeli crops are no longer welcome.
Economics Minister David Magen has proposed increasing tenfold the $250 fine for employers hiring illegal workers. "The rest [of a Palestinian work force that numbers 110,000 daily] will have to find alternative jobs where they live," he said.
The Defense Ministry recently almost doubled -- to 20,000 -- the number of West Bank Palestinians barred from entering Israel. A government committee floated the idea of restricting the Palestinian work force allowed into Israel to 50,000 tightly screened people. In the Knesset, bills calling for separation and banning of Palestinian workers have been introduced from the left and the right.
At the same time, illegal efforts have sprung up in Jerusalem to deprive West Bank Arabs of their jobs through intimidation. The movement began after the killing last month of Rabbi Meir Kahane in New York. Two stores that employed Arabs have been firebombed, and a Jewish merchant and his Arab clerk were stabbed by an assailant who demanded that the Arab be fired. New signs now appear in shop windows: "No Arabs employed here."
Last week, police arrested three prominent members of Mr. Kahane's political organization on suspicion of involvement in the intimidation campaign.
All of this speaks of the radicalization that has overtaken politics here since Iraq's Aug. 2 invasion of Kuwait and the Oct. 8 killing of at least 17 Palestinians by Israeli police at Temple Mount.
A recent poll indicates that more than 50 percent of Israelis now favor some form of separation.
"The Israeli public shifted very strongly, so that even moderate doves are now saying that you cannot sit down with these people, you can't trust them," said public opinion analyst Daniel Elazar. "This is the hardest line in public opinion since the beginning of the 'intifada.' "
Adding impetus to the notion that the Israelis can do without the Palestinians, who dominate such fields as construction and agriculture, is the arrival of 140,000 Soviet Jews in recent months, and the expected arrival of at least a million more over two years.
Several municipalities already have replaced their Arab workers with Soviets. In a Jaffa neighborhood, an old Polish Catholic Church has become the site of a new, Eurocentric "slave market," drawing crowds of job-seeking immigrants and prospective employers every Sunday morning.
Meanwhile, the invasion of Kuwait has created an influx in the territories of perhaps as many as 30,000 Palestinians who had been working in Kuwait.
Although it is impossible to precisely calibrate the immediate effect of all this, official government figures place the number of Palestinians who have so far lost jobs at 3,000; Palestinian economists and political activists say the real number is as high as 7,000.
In interviews, Arab workers speak of a great dearth of jobs in casual labor and a new desire of Jewish workers to find excuses to fire established employees.
"Up to two months ago, we used to be 70 percent Arab, 30 percent Jew at the factory. Now it is changing," said Salim Hussein, an Israeli Arab who works in a Jerusalem bakery.
"They are bringing in every week more Romanians and Polish Jews. Already, the ratio has changed to 60 percent Arab, 40 percent Jew. They are looking for ways to fire Arabs all the time."
A continued trend toward economic separation would cause heavy hardship among the Palestinians, whose economy depends greatly on Israel. The 110,000 Palestinians who go to work each day in Israel bring home an estimated $600 million a year, nearly half of the entire combined gross national product of the West Bank and Gaza Strip.
What is much less clear is whether there is any real chance that Israel could, in political and economic terms, afford a serious economic separation.
Reserve Brig. Gen. Ephraim Sneh, a former head of the West Bank Civil Administration, is one of those who flatly dismisses the possibility.
"The result of closing the Green Line would be to give 100,0000 Palestinians nothing to lose," he recently argued in the Jerusalem Report. "You would increase dramatically the social distress in the territories. It would be a prescription for increased violence."
Many economists and politicians say they doubt that Israelis, even the new Soviet arrivals, would be willing to do the kind of hard, often demeaning, physical labor the Palestinians provide, for the small wages the market pays.
"The Russians cannot replace the Arab workers," said right-wing Knesset member Eliachim Ha'etzni.