While in the first half of 2008 economic conditions were still very favourable in Austria, an economic downturn set in midyear and gained strength towards the end of 2008. This peculiar growth pattern implies that economic indicators for the year 2008 do not fully reflect the extent of the current economic crisis. This has also to be taken into account when analysing regional growth differentials: in regions dominated by manufacturing activities such as Upper and Lower Austria, Vorarlberg and Styria, the economy still grew at above-average rates, even though the export-oriented manufacturing sector was hit early and hardest by the recession. Besides these four states, growth in Tyrol was also faster than in Austria as a whole. Burgenland, Carinthia and Vienna were among the states with the lowest growth rates, Salzburg similarly remained below the national growth rate. Since the labour market generally lags behind the business cycle, all Austrian states were still able to significantly increase their employment levels in 2008. Regions in the west of Austria experienced higher employment growth rates than those in the east. Unemployment rates still fell, Salzburg being the only exception.