Hi I am on a Mac Mojave, using Photoshop 2019 (20.0.2)
The auto layer select is disabled within any marquee selection. If I place the marquee to only include part of the image then the layer portion within the marquee will NOT auto layer select. I have tested this using the move tool using command+click and the auto-select layer check box. Drop down IS set to layer. The tool behaves normally when there is no active marquee selection and also breaks with the lasso selection.