This is by design. Mute is what we’d call a soft filter, not a hard action.
Muted accounts are not filtered out of user searches, in order to allow the muter to locate the account to unmute them. When the Mute feature was launched, we didn’t have the web management panel for listing muted users (and it is not available on mobile), so you may want to be able to find and unmute someone via a search.
I hope that helps to explain the rationale.