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It's not that they specifically want less people to do work, rather, high employment is a symptom of an overheating economy in which hiring is (for now) cheap and it's difficult to replace people and meet high demand, because most people who would be looking for a job already have one.

My understanding is that it will reduce overall demand because people cutback on spending to prepare for a recession, or simply don't have the spare cash to buy because their financial situation changes by becoming unemployed (or someone in the same financial household did).

The Fed believes higher unemployment will bring down inflation. Also, higher unemployment increases labor market flexibility so that companies can easily adjust their labor force based on fluctuations in the market. Low unemployment makes it hard for companies looking to hire and expand.