The terminal process failed to launch in VSCode (macOS)

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When attempting to run/debug my VSCode extension, I'm getting the following error:

The terminal process "/usr/local/bin/zsh '-c', 'npm run watch'" failed to launch (exit code: 127).

I have set terminal.integrated.shell.osx to my zsh location in settings but it’s still failing for some reason. When I run /usr/local/bin/zsh '-c', 'npm run watch' from iTerm it runs fine.

How can I fix this error?

I'm also wondering if this is the reason all my breakpoints are unbound when I set them.

unbound breakpoint in VSCode

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