Hello,
Hot reload after code changes is supported however building with a Docker file, a complete rebuild and redeploy will happen which in turn may not be as fast. Additionally, it should be available if you choose to run without debugging mode [1].
Can you kindly try to uninstall and reinstall the extension or try coding on a different machine to compare the performance. Lastly, I suggest to contact the team directly [2] for further information.
Regards
[1] https://github.com/GoogleCloudPlatform/cloud-code-vscode/issues/356
[2] https://github.com/GoogleCloudPlatform/cloud-code-vscode/issues