Two goals after the break from the Bulls cancelled out Alex Kempster's first-half strike to leave Watson with just one win since taking over at Bootham Crescent.
Speaking to the club's video service after the game, Watson couldnt understand his side's capitulation.
"The second goal came so quickly after the first goal and it’s unacceptable," he said.
"It’s been long enough that I should be able to change it but once they’re out there and it starts going badly, the response sometimes is mind-boggling.
"I’m under absolutely no illusions that it’s nowhere near good enough.
"When that second goal didn’t come, the lads true to form, as we have all season, their heads went down and all their confidence starting waning away.
"A mentor of mine always used to say, we can always win the next one and that’s what we have to believe.
"Make no mistake, this game will be on my mind for a good while yet."