Lisa - I think this yellow caterpillar was probably an American Dagger Moth (but probably a middle instar, so it's setae - hair - is not quite so long as on a final instar). Some people do react to the setae (hair) on a variety of caterpillars -- either a skin rash, or a respiratory effect. Some species of caterpillars are worse than other for causing rashes. My advice is really to not handle caterpillars that have furry bodies - especially those with particularly bristly or spiny hairs as some of them can actually cause a stinging reaction similar to that of touching nettle plants.
