iMovie should be able to access iTunes audio from the audio pane in the iMovie sidebar. But it must be iTunes audio, not Apple Music. Apple music is a subscription service in which the songs are all DRM protected and thus cannot be used in iMovie.
If Apple Music is not the problem, it could be a number of things that can cause failure of audio recognition.
Possibly it is a corrupt preferences. Try deleting/resetting preferences and see if that cures it. Open iMovie while holding down the Option and Command keys and select to delete preferences in the box that appears. iMovie usually will open in a new empty library. If so, reopen your old library to get back to your projects. Possibly you may need to reboot to set the changes. Deleting preferences is a safe procedure that will not cause data loss or disruption to your project.
Possibly audio is not enabled for your version of iMovie after update. Go to System Preferences/Security & Privacy/Privacy/Automation and in the right hand pane check the iTunes box under iMovie.

-- Rich