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Issue Type: Bug
On macos Mojave, running
VS Code version: Code 1.27.2 (f46c4c4, 2018-09-12T07:04:11.329Z)
Same issue here, but only when trying to open the in-app terminal.
I found this guide which explained a fix for the same problem in iTerm 2, I have applied the same changes to VS Code and it seems to have fixed the issue.
System Preferences -> Security & Privacy -> Privacy -> Full Disk Access -> Add Code.
This issue seems to originate from an upstream component and is not something VSCode can fix by making a change to the code. As such, I will go ahead and close it. If you can identify the component that is causing the issue, please report it upstream:
Thanks for understanding.