Although public support for Israel's ruling Labor Party has deteriorated since the general election of 1973, Labor appears to be holding its own against its rivals in public opinion polls and may be actually improving its position in the final weeks before the general elections scheduled for May 17.

According to a recent poll conducted by the Smith Research Center, the Labor alignment has increased its share of the vote from 32 per cent in March to 35 per cent in April despite the recent scandals culminating in the de facto resignation of Prime Minister Yitzhak Rabin. The poll was taken immediately after Defense Minister Shimon Peres was chosen to replace Rabin as Labor's candidate for prime minister.

The current figure is still considerably below the 39.6 per cent Labor won in the 1973 election and, according to the Smith poll, 17 per cent are still undecided.

The major opposition partly, the Likud, also gained, but less than Labor. The Likud rose from 23 per cent of the vote in March to 24 per cent in April.

The Democratic Movement for Change, the new protest partly headed by archeologist Yigael Yadin, which began with remarkable success, appears to have peaked and has actually lost ground. According to the Smith poll, the movement's share of the vote fell from 13 per cent in March to 11 per cent in April. The religious parties remained constant at 7 per cent.

Most political analysts here have long held that Labor was the favorite to win the May election, though with a reduced plurality, and the real question has been whether the Yadin movement could win enough seats to become the indispensable coalition partner for any party trying to form a government.

The recent polls indicate that although Labor is narrowing the gap, it would not be able to form a government without the movement if the election were held today.

However, it is not known whether Yadin can keep his parliamentary party together if Labor tries to lure some of his member away during the post-election coalition negotiations.