Thank you for pointing this out. The “magic sparkles” is the icon for something called “Anaconda Assistant” which is installed by default from the Anaconda distribution. It appears to be some sort of AI coding help, which requires an account sign-in. I have not done that, and I am not interested in it.
But it appears you are right! I read the JupyterLab Reference about extensions, and then went about disabling some to see if one was causing the effect. And, indeed, the culprit was Anaconda Assistant.
From the command line, I executed
jupyter labextension disable @anaconda/assistant
after seeing which extensions are active from
jupyter labextension list
and the cell-numbering problem went away. Replacing disable with enable made it come back.
Thank you for your insight!