Looks like those 1,500 pink slips to Chicago city workers won't be necessary after all:

Labor leaders will join Mayor Daley this morning in announcing that they're finalizing a two-year package of cost-cutting concessions that would save the jobs of 1,504 city employees targeted for layoffs. [...]

"There's a deal in the works," [Chicago Federation of Labor President Dennis] Gannon said this morning. "With 10.7 percent unemployment, it's unconscionable for labor leaders to stand by and allow 1,500 employees to lose their jobs and health care. There are still a lot of [union] organizations that have problems with it. But we're working toward" averting the need for layoffs.

The Sun-Times' Fran Spielman has more.  We'll post additional specifics after Daley and Gannon announce them.

UPDATE (11:45 a.m.): AFSCME Council 31 President Henry Bayer responds:

Last week AFSCME members who work for the City of Chicago voted by an overwhelming margin to reject Mayor Daley’s contention that the only way to close the city’s budget gap is by forcing all frontline employees to take what amounts to a 10% pay cut over the next two years. AFSCME members are among the lowest-paid city workers, many live from paycheck to paycheck, and they simply cannot afford a pay cut of that magnitude.

Mayor Daley insists he will lay off hundreds of AFSCME-represented city workers if his demand for a combination of 46 furlough days and unpaid holidays is not met. AFSCME believes these layoffs are wrong-headed and wrong-hearted. They will damage core city services, cutting libraries and health clinics, taking police off the streets to perform clerical duties, and diminish other important functions.  They will increase the ranks of the unemployed in a city already hard-hit by the economic downturn. And they will cause grave harm to those employees who will lose their jobs.

For these reasons, AFSCME presented the city with an alternative proposal that would be far less burdensome to union members than a 10% pay cut, but achieve the same savings as the city would garner from the scheduled layoffs of AFSCME members.

AFSCME has so far been vague about what is included in their "alternative proposal." We're trying to get some more details from their spokesperson and will report back with any further details.