According to Mike Merchant, extension service entomologist, these caterpillars are cankerworms. The extension office has received many calls about the problem.
Cankerworms eat tree and shrub foliage.
On large shade trees, they go unobserved until they are about an inch long and start spinning silks to drop out of the tree to find a place safe from predators or to form their cocoons. There's no use spraying unless the cankerworms are detected right away. Cankerworms are also called inchworms or measuring worms because of their crawling habit. They move forward by forming a loop, pulling their back legs to meet their front legs, then extending their front legs forward. They hatch from egg masses in early spring.