* Strike rallied U.S. labor movement after string of national defeats
* Public school classes to resume Wednesday
* Emanuel hails new teacher evaluation system
By Mary Wisniewski and James B. Kelleher
CHICAGO, Sept 18 (Reuters) - Chicago public school teachers voted on Tuesday to end their strike and resume classes in the third-largest U.S. school district, ending a confrontation with Mayor Rahm Emanuel that focused national attention on struggling urban schools.
Some 800 union delegates representing the 29,000 teachers and support staff in Chicago Public Schools voted overwhelmingly to resume classes on Wednesday after more than two hours of debate.
"I am so thrilled that people are going back," Chicago Teachers Union President Karen Lewis said. "Everybody is looking forward to seeing their kids tomorrow."
Lewis, an outspoken former high school chemistry teacher, said the entire membership of the union will cast a formal vote in the next two weeks to ratify a new contract agreement.
The delegates ended the strike on their second attempt, having decided on Sunday to continue the walkout for two more days so they could review details of a proposed three-year contract with Emanuel.
Emanuel had to retreat from a proposal to introduce merit pay for teachers and he promised teachers that at least half of all new hires in the district would be from union members laid off by the closing of schools.
Speaking at Walter Payton College Prep school in Chicago after the vote, Emanuel said he was pleased by the outcome.
"This settlement is an honest compromise," he said. "It means a new day and a new direction for Chicago public schools."
Lewis led the walkout on Sept. 10, the first Chicago teachers' strike in 25 years, to protest Emanuel's demand for sweeping education reforms. Some 350,000 public school students were affected by the largest U.S. labor dispute in a year.
Emanuel on Monday tried to get a court order ending the strike, angering the union. A court hearing on his request is scheduled for Wednesday.
US LABOR MOVEMENT GALVANIZED
The strike focused attention on a national debate over how to improve failing schools. Emanuel, backed by a powerful reform movement, believes poorly performing schools should be closed and reopened with new staff or converted to "charter" schools that often are non-union and run by private groups.
Teachers want more resources put into neighborhood public schools to help them succeed. Chicago teachers say many of their students live in poor and crime-ridden areas and this affects their learning. More than 80 percent of public school students qualify for free meals based on low family incomes.
Only about 60 percent of Chicago students graduate from high school, far below the national average of 75 percent and more than 90 percent in some affluent Chicago suburbs.
The decision by the union to walk out of classrooms eight days ago rather than accept Emanuel's reforms galvanized the weakened U.S. labor movement after a string of national defeats.
Unions lost battles recently in Wisconsin, where Republicans stripped public sector unions such as teachers of most powers to bargain, Indiana's decision to make payment of union dues voluntary, and the vote of two California cities to curb the pensions of government workers.
President Barack Obama was silent throughout the nasty dispute in his home city between Emanuel, who had been was his top White House aide, and a national union that supports Obama.
The strike had raised concern that the rift could damage union support for Obama and Democrats in the run-up to the Nov. 6 presidential and congressional elections. Teacher rallies drew support from other unions in Chicago from unions in neighboring states such as Wisconsin and Indiana.
Analysts said Emanuel was damaged politically by the confrontation, having alienated organized labor in a city with a long history of union activism.
"Rahm has been bruised by this fight, but he's still standing," said Harley Shaiken, a professor of labor studies at the University of California, Berkeley. "He may have to learn that using a bulldozer isn't the most effective tool to be used in all circumstances."
Some union delegates on Tuesday said they wanted the strike to end because they did not want to lose the support of parents inconvenienced by a long dispute. Parents scrambled to find alternative childcare during the strike.
"I'm so excited that my kids are going back to school," said Tiffany King, whose sister cared for King's 12-year-old child during the strike. "Every day I would tell my child, 'You'll be back to school soon,'" she said.
The contract that was agreed with Emanuel includes several compromises, including on his key demand that teacher evaluations be based on results of standardized tests of student in reading, math and science. Test results will be taken into consideration but not as much as Emanuel originally wanted.
"For the first time, teachers will have a meaningful evaluation system...Our evaluation system has not changed in 40 years while our students and the world they will live in and will work in has," Emanuel said.
Many Chicago public school students perform poorly on the tests. The union distrusts Emanuel, fearing he will use the poor academic record to close scores of schools now that the strike has been called off, leading to mass teacher layoffs.
"I hope he agrees to this in good faith and carries out this contract," Lewis said.
The proposed deal calls for an average 17.6 percent pay raise for teachers over four years and some benefit improvements. Chicago teachers make an average of about $76,000 annually, according to the school district.
Financial analysts have said the agreement likely will bust the school district's budget and could lead to its credit rating being downgraded, forcing it to pay higher interest rates to finance any deficits.