Second order effects of unemployment

First they came for the beer sales, and I did nothing, for I am not a beer salesmen

Random Walk is at a conference this week, so notes will be shorter and lighter.

• what can beer sales tell us about unemployment?

• the youths and the ‘under-educated’ cannot get jobs as easily as before (but it’s probably no big deal)

• are we doing a Canada?

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Second order effects of unemployment

Part of why public markets are so fun is because you learn the darndest things, sometimes.

The really important question is ‘how much beer can we sell?’

Two weeks ago, the “international producer and marketer of beer, wine, and spirts,” known as Constellation Brands STZ 0.00%↑, made a small downward revision to its expected beer sales.

Instead of growing beer sales 7-9%, Constellation now expects to grow a mere 6-8%.

Huge change, I know.

Obviously, that’s not the interesting part.

The interesting part is why the company made the downward revision:

We took a look at our top 5 markets California, Texas, Florida, New York, Illinois. And what we were seeing is that those markets, which are roughly half our business, have been a little slower. . . .

Partly what we're seeing is that these are also markets that over-index in the Hispanic community—as most of you know that Hispanic consumer represents over half of our total volume—[and] we've seen an uptick in the unemployment rate of [] that consumer.

Barclays Consumer Staples Conference

In other words, Constellation expects to sell less beer because of rising unemployment in the Hispanic community.

Roughly half its sales come from Hispanic people (in five states)—Modelo is the nation’s top-selling beer—so small changes in employment have sizable impact on the barman’s topline.

Not that I’m surprised, but Constellation Brands is, in fact, correct that Hispanic unemployment is rising:

BLS

At 5.5%, Hispanic unemployment is now a full percentage point higher than it was back in March of this year.

Is rising Hispanic unemployment really why they expect their sales to decline?

Who knows. It could be Constellation is just making excuses. The brand also blames election years, which sounds like total nonsense to me.

But the reality is that Hispanic unemployment (and Asian unemployment, interestingly enough), is rising more quickly than the rest of the bunch.

Had it not been for beer sales, Random Walk would not know that. So, thank you, beer man.

Doing a Canada

You know what else jumps out in the employment data?