In Appleworks, you need to have your information in the Database module. Then from the Layout menu choose New Layout; in the pane which opens click the 'Labels' button, then click the 'Custom' drop-down menu and choose an Avery labe (the list isn't up-to-date with Avery's currently labels): or just click 'OK' and specify the label sizes.
AppleWorks Help provides good instructions on creating a Labels layout for your database document.
If you do use the "Custom" option, do take note of the information below (from AppleWorks Help) regarding setting the horizontal and vertical dimensions of your labels:
5 If you chose Custom, specify the number of labels across the page and the horizontal and vertical dimensions of your labels. Then click OK. Note: Include the space between labels in your horizontal and vertical measurements. In other words, the horizontal measurement is the distance from the left edge of one label to the left edge of the next; the vertical measurement is from the top of one label to the top of the next.