This is what I saw after entering my personal information, including a password, and hitting "Continue". So now you tell me.
Actually, in this case the wasted time and effort on the user's part is relatively minor; I've seen similar registration pages that, on fail, "forget" a dozen data fields and force you to re-enter the data manually. And some of these pages don't have the helpful, "Oh, didn't we mention?" guidance as to what they require for a well-formed password.
As Saffer has outlined so well, these are often among the first (and sometimes the last) interactions users have with your site. Add that to my metric of Reduce User Frustration (RUF), and you can see that forgetting such simple tests and tweaks to your site or service or app can have huge effects on the user.