New York ? The union representing New York subway and bus workers reported progress early today in the intense labor negotiations to avert a strike and said that a midnight strike deadline had been suspended.

“We have made sufficient progress to stop the clock,” Transport Workers Union secretary-treasurer Ed Watt said.

The union’s 34,000 workers had been poised to shut down the nation’s largest mass transit system if they did not receive a new contract giving them raises and changing work rules they called demeaning.

The progress was made primarily in noneconomic areas, Watt said. He said talks would continue “as long as there is progress being made.”

As the deadline passed, transit workers continued on the job.

“Believe me, we feel bad for everybody out there,” said token booth clerk Patrick Jarvine, who was working late Sunday at the Times Square station. “All we want to do is pay the bills. That’s all we want, and that’s not too much to ask.”

Mayor Michael Bloomberg warned New Yorkers Sunday afternoon to plan for a strike and declared “we are all in this together.” Gov. George Pataki rejected demands that he intervene in negotiations.

“There is no person capable of riding in on a white horse with a bag of money to resolve this contract,” Pataki said. He and Bloomberg spoke to reporters as the city’s emergency command center went into operation in anticipation of a strike.

Across the city, businesses prepared by reserving hotel rooms for employees and chartering buses, while residents bought bicycles, organized car pools and flooded city stores to buy holiday gifts and food. Millions pondered how New York would operate if the 34,000 union workers launched a strike in defiance of state law.

A strike would cost the city up to $350 million a day in police overtime costs and lost business and taxes, according to the mayor, and others had warned that a strike would create chaos in the streets, stranding travelers and endangering lives.