Join Date: Apr 2007
Location: Syracuse, NY
Bikes: 2008 Novara Randonee - love it. Would have more bikes if I had time to ride them all. Previous bikes: 1968 Motobecane Mirage, 1972 Moto Grand Jubilee (my fav), Jackson Rake 16, 1983 C'dale ST500.
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Again, you should spin the axle, not the entire wheel - much easier to check, but it definitely needs an overhaul. Have a shop do it or tackle it yourself if you are willing to buy any tools you don't have and follow the directions to be found in various places - repair manuals, Sheldon Brown's site, Park tool, Google "bicycle hub overhaul."
Just in case - Do you have to overhaul it? No, you can ignore it and it will get worse, eventually needing more parts or an entirely new hub or wheel.