That's a good point. The hour hand moves continuously as an artifact of technical constraints on the original clocks -- which I think is a great example of achieving a balance between UI and technical feasibility -- but we don't technically need them to work that way anymore, and digital clocks work exactly like that.
With that said, it's not obvious that we should use the jump hour UI[1]. It's desirable to have the hour hand be close to 4 when it's close to 4 o'clock. Like the neighbor comment says, that prevents you from confusing 4:58 with ~4.
Having discrete jumps on a mechanical analog clock is not a particularly hard problem. Certainly easier that shrinking an accurate mechanical time keeping device down to wrist watch size.
For that matter getting a purely digital display out of a mechanical clock is not diffucult either either.
If there was a strong demand for such a product, they would have caught on before the 7 segment display made them the cheapest option. Possibly as a luxury or status symbol depending on how the cost worked out.
With that said, it's not obvious that we should use the jump hour UI[1]. It's desirable to have the hour hand be close to 4 when it's close to 4 o'clock. Like the neighbor comment says, that prevents you from confusing 4:58 with ~4.
[1] See my "continuity heuristic": https://news.ycombinator.com/item?id=11687391