VS Code's file changes watcher stopped working

I have vsc version 1.63.2. I'm getting the following notification:

"File changes watcher stopped unexpectedly. A reload of the window may enable the watcher again unless the workspace cannot be watched for file changes."

When I click the reload button, the issue is temporarily fixed and Source Control shows changes to my files. Git in CLI is working fine; git log --raw shows changes to my files correctly. I've tested brand new and old repositories and workspaces. The problem occurs in all of them. Any help troubleshooting this is greatly appreciated!

I just ran into this issue today and found my solution by viewing the "Window" logs using the "Developer: Open Log File..." command from the Command Palette.

In my case, the problem was that I had added a folder to my workspace that I had since deleted on the file system. The log in question looked something like:

... [error] [File Watcher (parcel)] Unexpected error: Invalid handle (EUNKNOWN) (path: \path\that\no\longer\exists)
... [error] [File Watcher (parcel)] restarting watcher after error: Invalid handle

Hopefully viewing this log helps you find out what's breaking in your specific case.