It sounds like the work of a bagworm and the coccoon is called a bag or case. The larvae or caterpillars construct a characteristic bag that they carry around with them, hence the name "bagworm". The bagworm commonly attacks arborvitae, red cedar, juniper and spruce trees, though it has been reported to eat the leaves and needles from over 128 different trees and shrubs.  Plants may be partially defoliated, weakened and rendered unsightly. It is not uncommon for complete defoliation to occur, which results in the death of the conifer trees.

The larvae of the evergreen bagworm are 3/4 to 1 inch long when full-grown and vary in color from black to beige. The bags are composed of silk and portions of leaves and twigs from the plant on which they feed. The bag you see on your pine tree is meant to mimic a pine cone to evade detection. The adult male bagworms are small moths with well-developed wings; the females are wingless, legless and worm like.

Young larvae feed first on the leaf or needle surfaces and later they eat all but the larger veins of the host plant. Evergreen and deciduous trees may be almost completely defoliated due to the bagworms feeding. Most bagworms overwinter in the egg stage in the bags of the female insect. In late May and June, the eggs hatch and the young larvae begin to construct their cases and carry them about as they feed. They feed through most of the summer and, in August when they are full-grown, they attach the case to a twig or side of a building or fence post and pupate inside the case. In September and October, the males emerge and fly about to locate a bag containing a female. Mating takes place without the female ever leaving the bag and she then lays the eggs, which will overwinter.

Management
Handpick bags from the trees and destroy them. If bagworms are found on the siding of the house or building, a stiff wire brush is helpful in dislodging them, but do not use on aluminum or vinyl siding as it will scratch and possibly ruin siding. Chemical treatment options only work on bagworm caterpillars, not the pupae. By late summer the caterpillars are in the process of pupating. So if you're going to treat with chemicals, do it early in the spring or early summer when the caterpillars are active.

Courtesy of the NYBG Plant Information Service