I think that's the point:
a) Automatic categorization means offensive categories will be created
b) It takes a complaint to have them removed.
The click-through article also says that while "Jew Haters" was a group that could be selected, it was too small to buy a targetted Facebook ad for by itself. They added a few more 'jew-hating' categories, and a few 'Hitler' categories, and the target demographic was still too small.
It is unclear to me why the fact that this particular phrase was too small to buy for means it isn't a problem. The fact is you can target ads based on it, even though currently you also need to buy other groups.
Additionally:
The Daily Beast, which briefly ran its own ad campaign to test the company’s tools, says Twitter’s platform shows 18.6 million accounts “likely” to engage with the word “Nazi,” while another 14.5 million users might be drawn in by the N-word. For Twitter, the process seems entirely automated and there appear to be no safeguards in place — The Daily Beast tried a number of different hateful words and phrases and none were blacklisted by Twitter’s tools.
https://www.theverge.com/2017/9/15/16316352/google-twitter-a...