What factors led to an increased need for labor during the Industrial Revolution?

Like all technological changes, the Industrial Revolution created some jobs and destroyed others. Demand for some kinds of work, such as factory work, increased, while demand for other kinds of work, such as farming, decreased.

But the Industrial Revolution was actually largely responsible for the creation of wage labor as we know it; it was the Industrial Revolution that really made it possible to shift from feudalism, where most labor was done by serfs to appease landlords, to capitalism, where most labor is done by wage laborers who are paid by business owners. In sense, it was the Industrial Revolution that made them jobs where previously there had only been work. The concept of working a job for an employer for a wage really hadn't existed before capitalism. Before that people paid you to do things, or bought things from you, and you may have been a serf who owed to a landlord; but you did not have an employer in the modern sense of someone who pays you on a consistent basis for completing the same set of tasks they order you to do over and over.

A great deal of work which had previously been done either for personal consumption (subsistence farming, home crafts) or paid in-kind to landlords (a portion of the crop each year goes to the lord) was now done for paid wages. While money had existed for thousands of years, it was not until industrialized capitalism that money became the primary driving force in the economy.

Industrialization required building machines, and building machines required factories, with large numbers of laborers working in one place. For the first time in history, some machines were built in order to build even bigger machines---this is now what we mean when we say "real physical capital investment".

Industrial technology dramatically increased productivity, which made it profitable to create products that previously were too expensive to build. This created demand for laborers to build those products. Then a feedback loop was created, where the higher incomes of wage laborers allowed them to buy more products, which in turn made it more profitable to make even more products. It is by riding this feedback loop that industrialized countries rose from poverty to a modern First World standard of living---and by this feedback loop that we hope to do the same for other countries that remain in poverty.

Another thing that the Industrial Revolution did was dramatically increase food output, which in turn meant that cities could support larger populations. Larger populations had many upsides and downsides, but one of their upsides was an increase in the demand for labor and new types of labor. This began a process of people moving to cities to find jobs, which continues today around the world. Cities keep getting bigger and the number of people living on farms keeps decreasing, all around the world.