That's actually the intention. The federal government was originally intended only to provide basic functions like national defense and border control. Domestic policy would've been practically irrelevant.

The United States is a collection of fifty sovereign states that pool resources to pay for things that are beneficial to the geographic neighborhood, like a giant HOA. It's not fair to compare the universal policies in a conglomeration of sovereign states to the policies in independent jurisdictions; that is, the comparison should be California<->Sweden, not U.S.<->Sweden.

Under that framework, all labor law should be state-level. This promotes competition among jurisdictions for population, which means people have the option to move somewhere nearby if a jurisdiction passes a really undesirable law. More local jurisdictions also makes representative government a lot more feasible. A rep with 25k constituents is going to be much more available to the average citizen in their district than a rep with 25m constituents.

Some areas in the U.S. do have mandatory sick and parental leave, and some don't, and that's how the respective peoples like it. Time will tell which approach is superior. We think that kind of competition is good.