YES. This is inconsistent and unexpected behavior. As you said, it only appears on mobile for some reason. It also doesn't behave that way in the mobile header category navigation for a double dose of inconsistency.
To expand on the problem with my own implementation and a related problem:
I want customers to be able to browse the category tree in 2 ways. I want them to be able to view sub-categories as items on the page (not just in the category navigation); and also be able to stop at any level and view all the products at that level and below. In short, I actually want the "All [Category]" option.
If you leave a parent category devoid of items, it shows the sub-categories as items (👍), so I manually added a category at each level for "All Items In This Category and Below". This also allows me to show items that belong to multiple parents on a single page (eg. if I divide my categories into parents "browse by color" and "browse by shape", customers should be able to browse to a "blue circle" from either the "blue color" or "circle shape" parents).
It seems to all stem from the fact that on mobile, the category browser expands the parent with no way of actually selecting the parent itself, so Square auto adds the "All [Parent]" as an option below the parent. This could be solved by simply adding an "expand parent" button on the parent, but allow selecting the parent itself by tapping the parent name.
My desired browsing tree:
