Labels are not Folders

Gmail is different.  In Gmail you use labels that come with Google's great search engine. Labels are not folders. It may help to think of labels as tags such as with blog posts and social media. Labels are relational whereas folders are hierarchical.   Unlike folders you can use one or multiple labels. When you use labels it is like tagging emails, but its physical location never changes. In fact, the inbox is simply a tag for new mail. All of your mail will always reside in all mail.

Since labels are not folders there can be confusion if you expect them to as as folders. Remember when I said folders are hierarchical as in folder - sub folder - sub sub folder, that is where the confusion will start.  You don't have sub labels like you do with folders, but unlike folders each email can have multiple labels. So if you had folder A and sub folders A1 and A2, you would just label emails as A (main folder) and A1 or A2 (sub-folders) depending on the email.

One last tip. If you select an email or group of emails (check box) you can pull than right into a chosen label. You will first need to create the labels as shown in the video below. One thing to keep in mind is Gmail auto hides folders so if you think a label is gone click the more link.

Here is a video that shows how to set up labels.