With so many babies in Bethlehem, how would the shepherds know which baby it was?
Answer: The angel declared: And this is the sign unto you (Lk. 2:12). The term sign by itself does not require the miraculous, but minimally it does require the unusual, something out of the ordinary. This sign contained two elements: First, a babe was wrapped in swaddling clothes; and second, He was lying in a manger. The fact that the baby was lying in a manger told these shepherds not to look in the private homes of Bethlehem, but to look inside a cave that was used as a stable. Professional shepherds would know where these stable-caves were located.
The second clue the shepherds received was that the baby was wrapped in swaddling clothes. These could not be merely baby clothes because that would not be a sign. It was not unusual for a newborn to be wrapped in baby clothes. Being strips of cloth, the swaddling clothes gave the appearance of burial cloth. The symbolism should not be missed. On the very first day of His life, He was wrapped with the same type of cloth He would again be wrapped with on the last day of His life, showing the purpose of His birth. We were all born to live, but this One was born to die, as signified by His being wrapped in what appeared to be burial cloth.
(Based on Dr Arnold G. Fruchtenbaum, “Yeshua: The Life of Messiah from a Messianic Jewish Perspective,” San Antonio, TX, Ariel Ministries, 2017; pp. 60-61; https://ariel.org.au/products/yeshua-the-abridged-version)