1. Open the Command Palette (Ctrl+Shift+P), then select the Python: Select Interpreter. From the list, select the virtual environment in your project folder that starts with .env.

2. Run Terminal: Create New Integrated Terminal (Ctrl+Shift+` or from the Command Palette), which creates a terminal and automatically activates the virtual environment by running its activation script.

3. Install sqlalchemy and mongoengine with command pip install. Once installing them successfully, there will intellisense when you import them and no warnings shown.

Besides, the folder .vscode is to store Workspace settings as well as debugging and task configurations.

I had the same problem solved using instead of pip or easy install one of the following commands :

sudo apt-get install python-openpyxl
sudo apt-get install python3-openpyxl

The sudo command also works better for other packages.

This part is important:

If I run the file without vs code the module imports fine

If something like this happens, then you are not running the same python interpreter, because modules are always installed to specific installations of python that you have.

Do the following:

Add to your script the first two lines

import sys
print(sys.executable)

This will print the path to the python executable that is interpreting that script. If you now run this script with and without vs code, it should print two different python paths. Now you can install to the python interpreter that is being used by vs code specifically by typing

/path/to/python/used/by/vs/code/python -m pip install pillow