One of the more widely used slogans to address this dismal market environment over the last 19 months is the “lost decade.” Japan suffered its “lost decade” in the 1990s as deflation and sub-par growth strangled the Japanese economy from 1990 until 1998.

Now it’s America’s turn along with the United Kingdom and many other international economies and they follow the United States into the economic abyss. Deflation is alive with a vengeance and, after 19 months of aggressive global policy response, remains a nemesis.

Perhaps nowhere is deflation more pronounced than in households.

As household balance sheets in the United States continue to hemorrhage amid a protracted decline in real estate and stock market values, another threat lurks to add insult to injury.

Employee compensation as defined by wage growth has been on a downward trajectory since peaking in 2000. From a high of almost 4.5% year-over-year growth nine years ago, U.S. wage growth has plummeted to 2.4% through December year-over-year. That’s the lowest annualized wage growth this decade and, adjusted for inflation, is barely positive at all. Basically, American employees are barely getting ahead adjusted for inflation this decade.

Unfortunately, wage growth has slowed sharply over the past year as falling prices for consumers imply declining revenues for products and, eventually, layoffs. If wage growth turns negative over the next several months then deflation will have officially attacked employee compensation.

Judging by the latest string of unemployment reports the economy is losing millions of jobs since last fall and, along with it, consumers. It’s very hard to make a bullish case for domestic consumption when primary assets, like residential real estate and financial assets, are still rapidly deflating; worse, rising job losses result in foreclosures, more stock liquidation and a continued downward spiral as it pertains to net savings.

The stock market, at some point, will hit a bottom. Whether it’s THE bottom in this crisis is open to argument. I would view the next bottom in the context of a series of intermittent lows since late 2007 and not a secular bottom. Until household balance sheets and employment trends stabilize, there’s just no reason to aggressively buy stocks – even at these levels.