It's easy to see why: algorithms are foundational, and they're the kind of right or wrong test that give binary, merit-based substance to the nebulous process of assessing a candidate.
Still, I agree that they're overused. The truth is, the vast majority of modern programming doesn't even involve intensive algorithm writing and is more focused on the design and construction of apps that are nothing more than CRUD operations and business logic.
I think this is actually not a problem of overusing algorithms, but a problem of correctly separating the job titles related to software development.
There are software developers whose work actually requires no knowledge of algorithms, mathematics, or even CS besides their language, framework, and some architectural concepts.
On the other hand, there are "software developers" whose primary work is to develop algorithms and computational methods.
For historical reasons those roles are not always properly and clearly separated.
This can be one of the reasons why we have intimidating algorithmic interviews that are irrelevant to the actual work of the developers who are being interviewed.
Still, I agree that they're overused. The truth is, the vast majority of modern programming doesn't even involve intensive algorithm writing and is more focused on the design and construction of apps that are nothing more than CRUD operations and business logic.