That means they're easy to push around.
If demand were truly inelastic (what a "shortage" would imply) then rates/salaries would be rising and the on-boarding processes would streamline.
Their behavior appears to telegraph that there is no actual shortage.
Although from personal experience, I've been rejected from several companies and gotten more than one amazing offers at the same time (i.e. in the same "I want a new job" career cycle). So maybe the categories aren't that clear cut.
What this translates into industry is that managers and companies continuously grind through candidates in an attempt to find 10x rockstar ninja cliches, rather than finding diamonds in the rough and trying to just train people.
Of course, there are going to people who are worse than that level of quality. Maybe there should be some sort of guidance for them, that even if they fail interviews, they should at least get feedback as to how they can improve themselves, instead of being stuck in bad interview death spirals.
Some of us do and some of us don't find it all that terrible. I've declined interviews with homework and told the company I didn't think their interview process was reasonable. Companies are looking for leaders in addition to code monkeys - having a stance on what's reasonable that you can support and explain in a professional manner might lose you a few job opportunities, but it might also win you some respect and serve as a signal that you're mature enough to evaluate the landscape and make judgement calls about what actually is reasonable, which is something managers (people leaders) and architects (technical leaders) do on a day to day basis.
On the other hand, I find whiteboarding to be fairly reasonable for most candidates. I recognize that are a few candidates with social anxiety problems who might only be able to perform ubder an alternate process but in these cases, I think it's reasonable for the candidate to ask and then for the company to accommodate.
Supply and demand in the job market is only one component of the bargaining power. Social norms and many other factors play in.
The field of Organizational Ecology [2] also can offer some metaphors about what is happening. Both herd behavior and organizational inertia are significant factors that explain how companies interview.
[1] https://en.wikipedia.org/wiki/Inequality_of_bargaining_power