Looks fine but it’s hard to tell at that angle. If you have extra pads just replace them, they’re like $0.75 each.
Dip a qtip in acohol and go crazy wiping down the bearing seat and bearing post.
I know youve already done that but it can only be a handful of things.
Have you tried turning off and back on again? 
Do not do this, acetone melts PC
(I meant to make this a quote not a reply)
How are you putting your string on? Do you put it over the bearing and then put it back together, or do you loop it around the whole assembled YoYo?
Holy smoke good catch Kyle!! Thank you!! I’ve edited my post. I almost owed the guy another yoyo 
I feel like it got to be the bearing still or maybe the bearing seat needs cleaned with alcohol like mikeydoe said.
This is why I use rubbing alcohol. Works well w/o any potential hardware damage