I've filed a bug about this, but I'm not sure what else to test or add
to demonstrate where the problem is coming from. It's some combination
of squashfs + ext4 overhead I'm guessing, but then also the perf
report output on the pid for loop1 shows lzma is the top consumer by a
long shot.
So it seems like xz has a considerable performance/resource impact here as well.
https://bugzilla.redhat.com/show_bug.cgi?id=1717728