Thirty-eight raucous days of picket lines, tough talk and the angst of 4,300 San Francisco hotel workers locked out of their jobs with the holidays nigh were put aside Saturday when negotiators for the hotels and the workers' union agreed to a 60-day cooling-off period and ended, for now, the lockout.

It's only the completion of round one in a complex labor dispute, and agreement has yet to be reached on the major issues that separate the disparate sides. There could be more labor unrest in 60 days. Still, the clangorous picket lines came down within a few hours of the announcement of the accord, restoring relative peace downtown. Workers will be returning to their jobs beginning with a shift Tuesday at 10 p.m. It can't happen sooner because thousands of replacement workers must be transitioned out.

San Francisco Mayor Gavin Newsom announced the agreement in his office at 11 a.m., moments after negotiators for the employers and the workers union had signed it.

"This is a good day in San Francisco, and it is a good day for San Franciscans,'' Newsom said.

The lockout was hurting the city as well as the workers. Many luncheons and other gatherings at the hotels were canceled because guests would not cross picket lines. Among major cancellations was the American Anthropological Association, which last month moved its meeting from the San Francisco Hilton to Atlanta. Its 5,000-plus conferees would have spent $3,093,750 here during their stay, by the calculation of the San Francisco Convention & Visitors Bureau.

Linda Mjellem, executive director of the Union Square Association, said one of her retail members, on the square for 17 years, had its worst October in 17 years. Another retailer was, year-over-year, 7 percent ahead of last year prior to the labor dispute. In just four weeks' time, the owner has slipped to 1 percent ahead.

In neighborhoods and downtown, neighbors said the noise of the picket lines rang in their ears and made them miserable.

Unemployment, insurance covered

In accordance with the 60-day agreement, the union -- Unite Here Local 2 -- cannot strike, and the 14 San Francisco hotels involved cannot lock out workers. Also, the employers agreed not to appeal a decision by the state Employment Development Department that workers are eligible for unemployment insurance, and a trust fund jointly managed by the employers and the union will cover the workers' health care during the cooling-off period.

Earlier this week, three providers -- Kaiser Permanente, Chinese Community Health Plan and PacifiCare -- said they would extend coverage to the 3,400 workers for two months. They acted after the employers had blocked an effort by the union to withdraw $4.4 million from the trust fund shared by management and the union. It was to provide coverage beginning Dec. 1 when, lacking resolution, health benefits were scheduled to expire. The union thanked the providers for their gesture, which now is not necessary.

The state's decisions regarding unemployment and health coverage were critical elements in ending the lockout, but the president of Local 2, Mike Casey, listed three others: the support of Newsom, in his tireless advocacy of employees and in his disdain for the hotels' corporate management teams that locked out workers with the holidays approaching; the loss of business at the hotels; and union support in other cities.

"Ultimately, people made a business decision that this was no longer a smart strategy on their part,'' Casey said. "That's what happened here.''

The employers' view is different. Matt Adams, vice president of the hotels' contract bargaining unit, the Multi-Employer Group, as well as managing director of the San Francisco Hyatt Regency, said significant movement had been made on both sides during marathon negotiations Friday. This "created an environment, a dynamic'' that led the employers to believe "that we can reach agreement in the next 60 days.''

Thirty days ago, Newsom urged both sides to agree to a cooling-off period, but Adams said his side then had lacked the confidence they have today that settlement within two months was possible. "It was never our intent to have our employees out,'' Adams said. "We wanted them at their jobs, and to be able to work toward bargaining for a contract while they are on the job, I think, is a win for everybody.''

Both sides praised Newsom for his participation in the dispute, notwithstanding his advocacy for the workers. He called the lockout heartless. The two sides issued a statement reading, "We look forward to Mayor Newsom's continued role in assisting us in negotiations and thank the City and County of San Francisco for its commitment to see this dispute resolved.''

The two sides met from early morning until nearly midnight Friday at the Bill Graham Civic Auditorium. During that time, both sides removed proposals the other side objected to. The employers pulled the idea of random drug testing, increasing work for room cleaners and a plan to limit paid time off, while the union discarded the idea of adding to the bank of paid time off and accelerating vacation accrual.

Concessions from both sides

All are peripheral issues, but removing them showed good faith on both sides, Adams said. With them gone, the air was cleared to take on the major issues: health care, in which the employers seek greater cost-sharing by the workers; pensions; wages; the right to organize at other hotel properties; and the term of the next contract. The hotels have proposed a five-year pact, while the union prefers a two-year term that would put it in a negotiating cycle with unions in other cities. Casey insisted contract length remained on the table.

The settlement of the peripheral issues "laid the foundation for both sides to say, 'OK, now is the time to get back to work and see if we can resolve this,' '' Casey said. "And we're just delighted this can be done on a level playing field with the lockout ended.''

Conventions were canceled, neighbors were harassed by endless harangues and chanting on bullhorns, and businesses within shouting distance of picket lines have lost money since the lockout began Oct. 13 -- triggered, as it was, by a 2-week-long strike against four of the 14 hotels. It was something akin to a grieving period for Ann Hurt, 61, a server at the Fairmont Hotel for 26 years.

"In the beginning, you feel betrayed and hurt, and then you go to the anger part and then to the point where you feel stronger,'' she said of her time on the picket line. "Now I feel glad for everyone. I think we turned a big corner. I'm very confident we are going to get the contract we want.''

Rory O'Connor, 41, a bellman at the Four Seasons, said, "Some days you came to the line, and it was depressing. We had no inkling on Friday this was going to happen. I think it was the benefits coming through. That was huge.''

The workers were beaming Saturday as the picket lines came down, and members of many other unions started a boisterous march through downtown shouting pro-labor slogans.

At the Argent Hotel, Rebecca Lacap, a room cleaner for 14 years, said, "We're happy even though we don't have a contract yet. While we were here, we've been eating outside all the time, every meal. And that's a lot of money. ''

Chronicle staff writer Jason B. Johnson contributed to this report.