Roles required: Site Admin

Navigate to:
Communication area > Contacts
On the top right, there is a quick-link that says "Contact Labels" - click it.

Alternatively, you can go to:
Settings & Admin > Site Settings > Term lists/taxonomy
then click on "list terms" across from "Contact labels"

Rearrange the labels

You can rearrange the order of the labels by using the cross-arrows on the left of the list of term to drag and drop the labels into a different order.

Don't like the order you set? Click the button on the bottom of the list to "reset to alphabetical"