Repository: vscode
Issue: Visual Bug in Nested Folder Tree View
Labels: bug,file-explorer

Issue Type: <b>Bug</b>

1. Create nested folders without files in it.

2. Select the parent folder, it will look like <code><ins>src</ins>/nested</code>.

3. Now click "New File", it will become:

<pre>
(all in grey)
src
  nested
  | input file name here</pre>

4. Now click "New Folder", it will become:

<pre>(all in grey)
src/<ins>nested</ins></pre>

5. Now the tree view will always be in grey, unless you create file again.

GIF:

![屏幕录制2022-03-10 13 35 26](https://user-images.githubusercontent.com/8097890/157596675-61cec15d-6590-4f86-890c-602ec4b8d5f1.gif)

VS Code version: Code 1.65.1 (8908a9ca0f221f36507231afb39d2d8d1e182702, 2022-03-08T02:20:11.670Z)
OS version: Darwin x64 21.3.0
Restricted Mode: No

<details>
<summary>System Info</summary>

|Item|Value|
|---|---|
|CPUs|Intel(R) Core(TM) i5-8257U CPU @ 1.40GHz (8 x 1400)|
|GPU Status|2d_canvas: enabled<br>gpu_compositing: enabled<br>metal: disabled_off<br>multiple_raster_threads: enabled_on<br>oop_rasterization: enabled<br>opengl: enabled_on<br>rasterization: enabled<br>skia_renderer: disabled_off_ok<br>video_decode: enabled<br>webgl: enabled<br>webgl2: enabled|
|Load (avg)|4, 3, 3|
|Memory (System)|8.00GB (0.82GB free)|
|Process Argv|--crash-reporter-id db11351d-8b0e-4a89-8e62-31fbc5ba6fa2|
|Screen Reader|no|
|VM|0%|
</details><details><summary>Extensions (30)</summary>

Extension|Author (truncated)|Version
---|---|---
icons-carbon|ant|0.2.4
intellij-theme|arz|1.10.0
markdown-mermaid|bie|1.13.2
vscode-eslint|dba|2.2.2
vscode-new-file|dku|4.0.2
gitlens|eam|12.0.2
vscode-html-css|ecm|1.11.0
EditorConfig|Edi|0.16.4
prettier-vscode|esb|9.3.0
copilot|Git|1.7.5250
vscode-pull-request-github|Git|0.38.0
gitkraken-authentication|git|1.0.3
better-cpp-syntax|jef|1.15.13
ts-react-hooks-tools|kin|0.1.17
vscode-gutter-preview|kis|0.30.0
vscode-language-pack-zh-hans|MS-|1.65.2
python|ms-|2022.2.1924087327
vscode-pylance|ms-|2022.3.1
jupyter|ms-|2022.2.1030672458
jupyter-keymap|ms-|1.0.0
jupyter-renderers|ms-|1.0.6
vscode-github-issue-notebooks|ms-|0.0.115
gremlins|nho|0.26.0
material-product-icons|PKi|1.2.0
restart-ts-server-button|qcz|1.0.1
shader|sle|1.1.5
code-spell-checker|str|2.1.7
svelte-vscode|sve|105.12.1
sass-indented|syl|1.8.19
vscode-todo-highlight|way|1.0.5

(1 theme extensions excluded)

</details><details>
<summary>A/B Experiments</summary>

```
vsliv368:30146709
vsreu685:30147344
python383:30185418
vspor879:30202332
vspor708:30202333
vspor363:30204092
pythonvspyl392:30443607
pythontb:30283811
pythonvspyt551:30345470
pythonptprofiler:30281270
vshan820:30294714
vstes263:30335439
vscoreces:30445986
pythondataviewer:30285071
vscod805cf:30301675
pythonvspyt200:30340761
binariesv615:30325510
bridge0708:30335490
bridge0723:30353136
vsaa593cf:30376535
vsc1dst:30438360
pythonvs932:30410667
wslgetstarted:30449410
vsclayoutctrt:30448491
dsvsc008:30440022
pythonvsnew555:30450902
vsbas813:30436447
vscscmwlcmt:30438805
vscgsvid2:30447481
helix:30440343
vscaat:30438848
pynewfile477cf:30450039

```

</details>

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