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If you're at all interested in staying at your current place, maybe phrase it in a way that reminds him of what was said re: leaving and ask if anything has changed - that way it won't come across like F it I'm out, but rather that you really enjoy working where you are and are exploring other options based on what was communicated to you - can't blame you for that.

 

I say tell him. Everyone pretty much knows it's 2 and out anyways so he'd probably be surprised if you're not looking. I'd let him know that regarding your discussion when you were hired that he didn't expect you to be there for longer than 2-3 years and you're starting to apply/interview for your next step. Then during the ensuing conversation, you could even ask him if he has any contacts that you could talk to that might be able to help you get a position.

make it hard to spot the general by working like a soldier
 
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