A couple of  ways to do this.  One is to modify the mailmerge main document
to a catalog or directory type document with as many columns as your label
sheets with the columns the same width as the labels and in the first column
insert a one cell table with the row height fixed to match the height of the
labels and the page top and bottom margins set to match those of the label
sheet.  When you execute this merge to a new document, that document will
contain one row in the table for each record in the data source, with the
data arranged in the order that you want.  If you got the mailmerge main
document set up right, you should then be able to print that document onto
your label stock

The other way is to use the following macro on the data source

' Macro created by Doug Robbins to assign numbers to data source so
' that it can be sorted to cause labels to print down columns
Dim Message, Title, Default, labelrows, labelcolumns, i As Integer, j As
Integer, k As Integer
Message = "Enter the number of labels in a row"    ' Set prompt.
Title = "Labels per Row"    ' Set title.
Default = "3"    ' Set default.
' Display message, title, and default value.
labelcolumns = InputBox(Message, Title, Default)
Message = "Enter the number of labels in a column"    ' Set prompt.
Title = "Labels per column"    ' Set title.
Default = "5"    ' Set default.
labelrows = InputBox(Message, Title, Default)
ActiveDocument.Tables(1).Columns.Add
BeforeColumn:=ActiveDocument.Tables(1).Columns(1)
ActiveDocument.Tables(1).Rows(1).Range.Cut
k = 1
For i = 1 To ActiveDocument.Tables(1).Rows.Count - labelcolumns
   For j = 1 To labelrows
       ActiveDocument.Tables(1).Cell(i, 1).Range.InsertBefore k + (j - 1) *
labelcolumns
       i = i + 1
   Next j
   k = k + 1
   i = i - 1
   If k Mod labelcolumns = 1 Then k = k - labelcolumns + labelcolumns *
labelrows
Next i
ActiveDocument.Tables(1).Sort FieldNumber:="Column 1"
ActiveDocument.Tables(1).Rows(1).Select
Selection.Paste
ActiveDocument.Tables(1).Columns(1).Delete