In MANUAL 3rd/Direct gear, there WILL BE engine braking --- because, contrary to peoples' thoughts, using the lower gears ranges) is designed for engine braking, not accelerating.
IOW --- we don't manually upshift (unless we're still goofy kids) but we do downshift.
ANY manual gear placement besides OD/4th will produce engine braking - this is designed for those times when you have some long downhill runs and are carrying a couple of very obese people or a 10,000 lb trailer and you want to save the brakes for when you actually need them.
FUN FACT: SOME transmissions (by factory calibration and certainly not all) will start in 2nd/Intermediate when you put the quadrant selector in that position --- this is to lower the torque to the rear wheel (all wheels in 4WD) and raise the torque convertor to its stall value without TCC/LU so you can start up from a stop with little to little-to-no wheel spin.
This will force the (what else can you call it) TORQUE CONVERTOR will be in full torque reduction. Hence the name TORQUE CONVERTOR is a truism(*) --- that's what it does ... convert torque! Amazing.
(*) like: SHOCK ABSORBER --- the name says it all!
I digress ...............
YES --- if the factory calibration allows it --- the fuel will shut off in a manual gear setting IF the plenum vacuum gets to a preconceived metric.
The oxygen sensor heaters will come on, anticipating a flow of fuel in a while, but trying to keep themselves ready as necessary --- according to the ECM programmer at GM in this case.
If, in 4th/OD when you take your foot off the accelerator --- the oxygen sensors will still be getting sufficient readings to keep the cat(s) happy because there will still be fuel a-flowing(*), and there'll be no need to turn the heaters ON --- but there will be NO engine braking.
(*) not much fuel because there's not much air either with the throttle plate closed --- this will theoretically be the same as IDLE-MODE and the AFR will still be 14:1.
I hope this clarifies(*) some concepts.
(*) For Teenagers: lissen at me hard here --- ya heya?