Many workers, politicians, and commentators across the developed world emphasize the loss of jobs to low-cost labor elsewhere. Responses to McKinsey Global Surveys over the past several months indicate that the trend may be shifting.

Respondents across developed economies indicate that getting the same work done elsewhere is not high on their agendas, though there are some differences among them. In the latest survey,¹ for example, more than half of the executives at companies headquartered in the developed world say the majority of their new jobs will be created in the same country as the corporate headquarters. And among the smaller group who say most jobs will be created abroad, more than two-thirds expect the majority of them to consist of new functions (Exhibit 1). Only a quarter say that most new jobs created abroad will be the same as those now performed at home.

Around the world, executives have consistently reported that far more companies plan to increase their workforces than to decrease them and that a majority of the new jobs will be created at home (Exhibit 2). Moreover, of the small number of jobs lost around the world, only 20 percent will be eliminated as a result of outsourcing,² a figure almost identical to that for developed countries alone. And nearly three-quarters of the respondents who do not expect the size of their workforces to change say they don’t expect any significant function now performed in the home country to move elsewhere.

What about China and India, where jobs are thought to be going? Businesses there do seem to be thriving, even with relatively few jobs coming from companies in developed economies. Executives in China report the biggest increase in hiring of any region: 62 percent of respondents there expect to boost their workforces, up from 52 percent six months ago. Executives in India remain by far the likeliest to hire. About two-thirds of the executives at companies headquartered in either country expect most hiring to be done at home.

These generally strong hiring plans mirror the executives’ generally high confidence in their countries’ economic prospects. Executives in China, for example, have become much more optimistic in the past six months. With the exception of North America, more than half of the executives expect economic conditions to be better six months from now (Exhibit 3). Executives in North America have consistently shown less optimism than respondents in any other region. The majority of North American executives, those in the United States, have reasons to be concerned, including uncertainty about the outcome of the war in Iraq and about oil prices. Optimism in the developed economies of Asia has improved most: there, 60 percent of the surveyed executives say they expect economic conditions to improve, up from 38 percent six months ago. And the strong growth prospects for developing economies around the world are reflected in the fact that executives in those regions are consistently the most optimistic respondents.

Many executives, despite their overall optimism, see a threat of higher inflation (Exhibit 4). Over half of the respondents expect inflation in their countries to increase by at least one percentage point over the next six months. In regions where the overall economic outlook has become notably more positive in the past quarter, the prospect of higher inflation is prevalent: in China and the developed economies of Asia, more than two-thirds of executives expect it. By contrast, less than 45 percent of the executives in India and Latin America do. These findings are particularly surprising—in India because the rupee has been appreciating steadily against the US dollar and in Latin America because of the region’s historically high rates of inflation.

Consistent with past opinions, nearly two-thirds of the executives cite oil and gas costs as the top driver of inflation (Exhibit 5). That concern is particularly prevalent among executives in North America (80 percent). In contrast, executives in developing economies perceive the main factors affecting inflation in their countries to be the level of demand for goods and services and potential changes in currency exchange rates.

Executives across regions and industries report that not even the prospect of higher inflation will give their companies increased pricing power (Exhibit 6). This pessimism about price increases may help to explain why the executives are less optimistic about the economic prospects of their industries than of their countries. In most regions, the respondents foresee little or no improvement in their industries over the next six months, making them far less optimistic than they were six months ago (Exhibit 7). In addition, a lower proportion of the executives expect conditions to improve in their industries than in their countries.