Describe the bug
When changing the link of a navigation menu item to a post or page the label of the link does not update to the one of the selected post or page.
To reproduce
Expected behavior
The new selected page or post should be reflected by a new label.
Screenshots

Although I think you're right, I'm not 100% sure that this behavior wasn't to desired. AFAIK, the link label is populated from the page title only if it is not defined. Guessing it was the intended behavior in order to keep the previous label, that btw may be defined explicitly b the user.
My first instinct is “that’s a bug.” If I’d manually changed the label, I’d see maybe keeping it.
But if I add and then replace without manually editing the label, I expect it to totally replace the previous menu item.
I also feel like this is a bug when experiencing it so it might be worth fixing as a result.