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A label is a piece of text on the map that is dynamically placed and whose text string is derived from one or more feature attributes. When applying or updating the labels through the layer properties of selected features in a layer, the changes are applied to the entire layer instead of the selected features. This issue also occurs to a layer created from the selected features.
This issue occurs when changing the label of a selection in a layer, and is a known limitation.
There are two possible workaround for this issue. Use one of the following methodsUse the Make Feature Layer tool
Instead of creating a new layer with the selected features using the Create Layer from Selected Features function, use the Make Feature Layer tool.
If the new layer has already been created with the Create Layer from Selected Features function, use the Export Data function to export the data to a shapefile or feature class.