Originally reported by @joeyaiello, and I've seen it too on macOS:
https://github.com/PowerShell/vscode-powershell/issues/594#issuecomment-290576005
Need to keep using the existing Console.BackgroundColor instead of changing it to black.
With VS Code 1.12.0 you can work around this issue by adding the following to settings.json:
"workbench.colorCustomizations": {
"terminal.ansiBlack": "#1E1E1E"
}
This is for Dark+, replace 1E1E1E with the appropriate color for your theme.
Unfortunately, this is still broken as of v1.4.3 on macOS 10.13, shown here with the "Light+" color theme:

To spell out the workaround for white-background themes, courtesy of @Happycoil's tip:
"workbench.colorCustomizations": {
"terminal.ansiBlack": "#fff"
}
The fix for this issue hasn't actually been shipped yet, hoping to get it out this week.