It is a felt type material but is not available through the parts system. It is not necessary to replace it. The bearing are press fit so the shaft needs to cold and bearing very warm for ease of fit. The spindle bearings are dependent if you have a Husqvarna or MTD built unit. Husqvarna units uses 6203-2RS top and 6204-2RS bottom. The MTD units uses 6204-2RS for both bearings. These bearings have a C3 clearance rating.
The key here is to repack the bearing with EP2 grease as many bearings have poor quality grease and/or unpacked.