This is a consistent bug with the launch 1.0 version. Unfortunately there's not a great patch system in place, but if you download the current build (1.02), it should be solved (along with a couple other small issues, laid out here). Thanks for the report, and thanks for playing!
I just installed this game and played through to the part mentioned and have the same issue.
Thanks for your report, I'll be looking into it this weekend. Can you confirm that the .zip file you downloaded is name "LONG_LIVE_THE_AXE.zip" (with underscores, and not spaces)?
I did not download a zip, I am using the itch client to manage the files. The folder the game is in does have spaces though. Itch says it is "game 14396, version #744223".
Ah okay. It seems like the itch client unfortunately didn't play nice with the initial post-launch updates. I'm currently looking into how to solve the issue within the app, in the meantime if you can download the updated files manually from the game page if you want a version without this bug. Sorry for the late reply+inconvenience, and thanks for bringing this issue to my attention.