I came here to suggest this exact feature.
I have lots of old projects with relevant lables. Not using these
lables anymore doesn't mean that they have lost their relevance or
usefulness.
I would really like to see only "active" lables, so that my lables-
list won't be so cluttered with non-relevant information. (I can
access these by searching, og maybe by a "show all" option in the
list).
I can think of two possible solutions to this; 1) only show lables
with unread messages (as Mussum suggested), or; 2) only show "non-
hidden" lables (as has also been sugested here before). The
combination of these two will let you hide even labels with unread
messages, but these are anyways easily accessible trough some simple
searches.
I urgently need this for my own email, as well as for the email of two
NGO's I'm in that use Gmail for their common administration.
Thanks!