Today the market is deserted. Mr Masalmeh, who supports an extended family of 22, opens his cash box to reveal a few coins, perhaps 100 shekels, about pounds 18. "Usually," he claims, "I would have sold 3,000 shekels' worth of produce by this time."
He hauls out a box of bruised apples and pears. "I take these home for the family," he says. His shop is well stocked. It is not that there is no food in town. People just don't have the money to buy more than the basics - tomatoes, onions, potatoes.
One month after two Palestinian suicide bombers killed 14 Israeli civilians in a Jerusalem market, Bethlehem is the only West Bank town still cut off from both Israel and its neighbouring Arab communities. David Bar- Illan, an Israeli spokesman, explains: "We have reports from our security services that possible terrorist operations are being planned by individuals in Bethlehem. As long as those reports remain valid, the closure on Bethlehem will continue."
Jesus's native town, which has been under Palestinian self-rule for nearly two years, languishes in its isolation, idle, resentful and totally unconvinced by Israel's security argument. With the blessing of Yasser Arafat's Palestinian Authority, young protesters stage a daily rerun of the intifada riots at a checkpoint near the biblical Rachel's tomb.
"This is a ghost town," says Mayor Hanna Nasser, waving from his office over an empty Manger Square. "Everything is frozen. The people are very close to losing hope. The Prime Minister of Israel is killing the spirit of the peace process."
Mr Nasser estimates the loss of income from tourism, factories, farms and outside jobs in the first month of the siege at $7m (pounds 4.375m). About 80 per cent of the town's 35,000 residents, he says, are unemployed. "Nobody's working. Day labourers can't get to Israel, and even local factories are having to close because their raw materials are not being cleared from Israeli ports."
Khalid Bandak, manager of the 50-room Grand Hotel, hosts not a single guest. Three groups of Christian pilgrims have cancelled at the last minute.
"We have had to lay off 12 workers, most of our staff," Mr Bandak reports. "We can't pay them because we have no money coming in. We've lost about $45,000."
Just as people are not starving in Bethlehem, they are not dying for want of medicines. The Israeli Prime Minister, Benjamin Netanyahu, ordered that foodstuffs and medical supplies be allowed through the blockade. But people are suffering the kind of cliff-hangers that, sooner or later, will lead to tragedy.
Mohammed Manasreh's 85-year-old mother lives in a village outside Bethlehem. Because of a chronic heart condition, she needs oxygen. Every three days, Mr Manasreh goes to replace the cylinder. He lives in Bethlehem, his mother in an area under Israeli security control. To get there he has to drive through back roads and hope the Israelis don't catch him. This week the army blocked one of his favourite routes with boulders, but so far he's been lucky.
The West Bank medical services are interdependent. Bethlehem's Hussein hospital has a cancer unit, but intensive-care cases are sent 16 miles to Ramallah. One night it took the Bethlehem hospital's only ambulance two hours to run the gauntlet of security checks and ferry a 43-year-old man in a coma to Ramallah for emergency dialysis.
Bethlehem wanted the Oslo peace process to succeed. It has always tried to avoid confrontation. To flourish, it needs open borders and international confidence. The Palestinian Authority pinned its hopes on "Bethlehem 2000", when record numbers of pilgrims were expected.
Now disenchantment is setting in. Every conspiracy theory has its takers. "The siege of Bethlehem has nothing to do with security," contends Salah Tamari, who represents the town in the Palestinian parliament and accuses Israel of plotting an alternative Bethlehem on the Har Homa construction site between Jerusalem and Bethlehem. "The Israelis," he charges, "are implementing a premeditated plan to strangle the Palestinian economy."
Israeli security chiefs are warning Mr Netanyahu of an impending explosion of rage on the West Bank. In Bethlehem this bleak August it sounds all too likely.