No, they don't hallucinate “all the time”, but LLM “hallucination” is a bad metaphor, as the phenomenon is more like confabulation than hallucination.
Humans also don’t confabulate all the time, either, though.
> "It's important to recognize hallucinations can come and go during our lives at points of stress or tiredness," Seth said. "There is a bit of a stigma around hallucinations. It comes from people associating them with mental illness and being called crazy."
> But it's actually very common and happens even daily. The itching Yarwood experiences is particularly common, especially after drinking alcohol.
> "It's also common for people with reduced hearing or vision function to get hallucinations in that ear or eye," said Rick Adams, a psychiatrist at University College London. "These are non-clinical hallucinations because they are not associated with a psychiatric diagnosis."
https://www.dw.com/en/hallucinations-are-more-common-than-yo...
Confabulation is more like making something up when you don't have sufficient knowledge. Seems to happen regularly :)