In the generated API controller, the generated Model Resource is used only for index method.

All other methods simply return the model object.

We should ideally use ModelResource everywhere in the API controller.

In the generated Api\UserController.php

public function show(User $user): User
{
    return $user;
}

should be

public function show(User $user): User
{
    return new UserResource($user);
}

Similar change for other methods - store and update.