Maybe for unskilled jobs, but the idea that an employer will hire/fire employees at the whims of the market, and there is zero cost to this process does not apply everywhere. There can be significant cost to on-boarding people depending on the industry / position.

Because the employer is at a massive advantage. For an employee having gaps in employment is a major thing when it comes to future employment, and can have massive effects on personal finances. For the employer, losing an employee a bit earlier is rarely a major issue (and if it is, they can generally convince people to stay a bit longer by throwing cash at the problem).

It is less relevant in high-paid positions where employees generally have the ability to put aside more of a cushion, but for lower paid employees it can be dramatic.

There's a reason the long notice periods in large parts of Europe are a direct result of decades of union pressure.

> That's leaving aside entirely the issue of how at will employment gives companies confidence to hire since they know they can shed employees if things go south.

If this was a real concern, then we ought to see a persistent problem of high unemployment across the countries with long notice periods, but to my knowledge we don't.