Fix 'observed' kwarg not doing anything on SeriesGroupBy
State: closed

- [x] closes #24880 
- [x] tests added / passed
- [x] passes `git diff upstream/master -u -- "*.py" | flake8 --diff`
- [x] whatsnew entry


Labels:
name: Groupby

Comments:
when u make changes - do it in the original PR otherwise this is very confusing
Sorry, I did not make any changes between the two PRs, except changing the branch. I wanted to switch because the first one was pushed from master.
ok fair enough - pls close one of them 
ok, closed the first one
# [Codecov](https://codecov.io/gh/pandas-dev/pandas/pull/26463?src=pr&el=h1) Report
> Merging [#26463](https://codecov.io/gh/pandas-dev/pandas/pull/26463?src=pr&el=desc) into [master](https://codecov.io/gh/pandas-dev/pandas/commit/e7ad88441b2586bc7f725ecd9b354b35a3ec8c99?src=pr&el=desc) will **decrease** coverage by `<.01%`.
> The diff coverage is `96.77%`.

[![Impacted file tree graph](https://codecov.io/gh/pandas-dev/pandas/pull/26463/graphs/tree.svg?width=650&token=eZ4WkYLtcO&height=150&src=pr)](https://codecov.io/gh/pandas-dev/pandas/pull/26463?src=pr&el=tree)

```diff
@@            Coverage Diff             @@
##           master   #26463      +/-   ##
==========================================
- Coverage   91.77%   91.76%   -0.01%     
==========================================
  Files         174      174              
  Lines       50649    50652       +3     
==========================================
- Hits        46483    46482       -1     
- Misses       4166     4170       +4
```

| Flag | Coverage Δ | |
|---|---|---|
| #multiple | `90.3% <96.77%> (ø)` | :arrow_up: |
| #single | `41.69% <12.9%> (-0.07%)` | :arrow_down: |

| [Impacted Files](https://codecov.io/gh/pandas-dev/pandas/pull/26463?src=pr&el=tree) | Coverage Δ | |
|---|---|---|
| [pandas/core/groupby/generic.py](https://codecov.io/gh/pandas-dev/pandas/pull/26463/diff?src=pr&el=tree#diff-cGFuZGFzL2NvcmUvZ3JvdXBieS9nZW5lcmljLnB5) | `88.81% <100%> (-0.16%)` | :arrow_down: |
| [pandas/core/groupby/groupby.py](https://codecov.io/gh/pandas-dev/pandas/pull/26463/diff?src=pr&el=tree#diff-cGFuZGFzL2NvcmUvZ3JvdXBieS9ncm91cGJ5LnB5) | `97.17% <95.65%> (-0.06%)` | :arrow_down: |
| [pandas/io/gbq.py](https://codecov.io/gh/pandas-dev/pandas/pull/26463/diff?src=pr&el=tree#diff-cGFuZGFzL2lvL2dicS5weQ==) | `78.94% <0%> (-10.53%)` | :arrow_down: |
| [pandas/core/frame.py](https://codecov.io/gh/pandas-dev/pandas/pull/26463/diff?src=pr&el=tree#diff-cGFuZGFzL2NvcmUvZnJhbWUucHk=) | `97% <0%> (-0.12%)` | :arrow_down: |

------

[Continue to review full report at Codecov](https://codecov.io/gh/pandas-dev/pandas/pull/26463?src=pr&el=continue).
> **Legend** - [Click here to learn more](https://docs.codecov.io/docs/codecov-delta)
> `Δ = absolute <relative> (impact)`, `ø = not affected`, `? = missing data`
> Powered by [Codecov](https://codecov.io/gh/pandas-dev/pandas/pull/26463?src=pr&el=footer). Last update [e7ad884...e6bca5e](https://codecov.io/gh/pandas-dev/pandas/pull/26463?src=pr&el=lastupdated). Read the [comment docs](https://docs.codecov.io/docs/pull-request-comments).

@krsnik93 note that you also have an isort failure
Hello @krsnik93! Thanks for updating this PR. We checked the lines you've touched for [PEP 8](https://www.python.org/dev/peps/pep-0008) issues, and found:







There are currently no PEP 8 issues detected in this Pull Request. Cheers! :beers: 

##### Comment last updated at 2019-05-29 09:02:24 UTC
does this have an associated issue?
Am I seeing this correctly? I don't see how test_constructor_list_frames could be failing from my changes...
It is unrelated; see #26546
I see, thanks.
@krsnik93 : the CI failures are fixed. can you merge master.
very nice @krsnik93 

would love to have followups as discussed above (or other issues) if you can.