In my experience, good developers have some algorithmic skills, this is a correlation, not necessarily causation. That is, they are not good because they know algorithms, but when you are a developer, you necessarily work with algorithms, even when your job rarely requires you to write them. If you don't know, it means you may not understand what you are working with or even worse, be unwilling to. Programming is a field where being willing to learn is important, as things move fast (at least on the surface) and every job is different.

So I think it kind of work as a filter. It is not perfect, other signals are needed, in particular, as the article says, the interview format may be a problem, but recruiters need something to test. And algorithms have the advantage of being relevant to the job (unlike logic puzzles), hard to bullshit (unlike experience), fair (unlike personal situation), and not too time consuming (unlike assignments).