Yes. The name of the file on your thumb drive will be "Install macOS Sierra".
If it has the word "update", or upd, as in "macOSUpdCombo10.3.6", then you would only have an updater.
As Nermal recommended, if you need the "Install macOS" app, it will be much simpler to download the current High Sierrra version.
The full Sierra install is more than 5GB, for example. (High Sierra is more than 5.2GB!) If yours is less than half that (meaning it is just an updater), then you still need the full install to make your VM.
I suspect that the problem that VMWare Fusion has is that the boot drive (when it is an SSD) is a different format (APFS), and one result is that the recovery partition is relatively hidden (not mountable in the Finder), where a Mac OS Extended (HFS+) partition that Apple had been using for years, had a recovery system partition that you could easily mount --- so, apparently that has become an issue for software that might be able to use the recovery system for other uses (such as the VM).
But, it's also easy enough to find a work around, such as using the installer app as the source for creating the VM, which is is what VMWare is using now.