Are time machine directory exclusions recursive?
Yes, directory exclusion are recursive. This means that if you exclude for example ~/MyDocuments/ then everything in that folder and beneath is excluded. That includes for example ~/MyDocuments/SubFolder/document.docx.

However, there are some special cases. When you have a non hard-link, the link itself is excluded, but the link is not followed to exclude the objects linked to. This means that a symbolic link or firm link, like you have in your case, is excluded from the backup - but not what it links to.

In your case /usr/local is not really a subfolder of /usr, but rather a link. This is the reason you see that /usr/local, which is really /System/Volumes/Data/usr/local, is not excluded when you exclude /usr.

Note that excluding a directory does not exclude the volumes mounted under that directory. For example sudo tmutil exclude -p /System will only exclude directories in the volume / (but not other volumes mounted to /System/Volume/ e.g. /System/Volume/Data/). 

According to the man page:


  The third kind of exclusion is a volume exclusion. These track volumes
  based on file system UUID, which is persistent across volume name and
  mount path changes.


Therefore sudo tmutil exclude -v / will exclude folders and volumes (including /System/Volume/Data/).