> There is no such thing as "excess supply of labor": if labor is cheap enough
I'm sorry to contradict you, but _where_ are you getting this nonsense? "Labor costs" that drop below a sustenance level kill workers, and even prevent the workers from participating in the local economy. Between those two limitations, and all the others, one can certainly have an "excess supply of labor". It's especially apparent in seasonal farm labor when drought or blight ruins the crops, and it was certainly a problem for winter food supplies in harsh climates.
Please, actually work as a farm worker, a fast food attendant, a cab driver, or try to feed a family on a minimum wage before you make such absurd claims,
> The reason those store fronts are empty is because your town/city is keeping the cost of doing business high
This is, once again, complete nonsense. "The town/city" is not keeping the expenses high as a matter of tax or licensing policy. There simply isn't enough street traffic to support so many vendors, especially when modern consumers so easily order goods online from around the world. And for the service industries, such as hair and nail salons, they need parking, foot traffic, and customers who can attend their salons when the businesses are open.
According to your stated theory "That is, increasing supply lowers prices but it also increases volume, also for labor.". It ignores the _caps_ on volume of business, caps due to capital supply limitations, due to available numbers of customers and frequency of service, and due to the minimum costs of keeping the workers alive.
Again, I don't know where you're getting these ideas. They're refuted by the most casual reviews of economic disasters, such as the Great Depression in the USA, or famines such as the Irish Potato Famine or the mass starvations of North Korea of the 1990's. There was no "labor shortage", people would work for less than a survival wage or survival diet and starve to _death_ as they struggled to outlast the famines and poverty.