When Apple introduced Pages 5.5 in October, the update included AppleScript support for mail merge, but omitted to provide a user interface for it. Rather than roll your own mail merge solution with the Script Editor, you should first check out the Pages Data Merge script application available at the iWork & Automation site.
And if you are thinking about using mail merge in Pages to create mailing labels, you probably want to use standardized label layouts. While Pages doesn’t offer a set of Avery label templates, you can get label templates for Pages ’09 from Avery. Pages 5.5 can open and convert those templates, so you can save the ones you need to the Template Chooser in Pages 5.5.