It could be the wood you're using. If it's an oily wood be sure to wipe it down with DNA or Acetone first. It still looks bumpy in the CA. I'd continue to sand on it to smooth it all out and see what you have.
I alway lightly spray my paper labels with a clear spray. It will help seal the dyes in so nothing bleeds with the CA. Then apply a thin CA layer over your wood to seal it. Then apply the label and let it the adhesive dry for a day. I also warm the blank up up after the paper label is on to remover any moisture from humidity before building my CA layers. I Apply several light coats with medium CA (Gluboost) and I allow each layer to fully core before applying the next. Once I have 5-6 layers applied, I sand the blank level with 360-400 grit sandpaper. Be careful not to sand through the finish and hit the label. Then I use #0000 steel wool with the lathe on high to smooth the surface out before I micromesh. Then I polish and buff. As you go, if you see any issues on the CA layers, stop and sand it down a little to remove them. The problem with medium CA is its thickness can actually seal blemishes in the cA finish. If needed, use a layer of thin or ultra thin during the process to fill any small voids. I only use medium because it faster to build a thick layer of the cigar band. You can use thin but want, just apply more layers to there's no issues with exposing the band during the finishing.
You can also finish the wood with a ca finish and then apply the label and seal it with 4-5 layers of thin CA. And finish. You'll feel the raised label but it will be protected under the ca.