Klopp’s men still enjoy a 22-point lead at the top of the table and need a maximum of four wins from their remaining 10 games to secure a first league title for 30 years.
However, defeat at Vicarage Road continues a downturn in form as they sneaked past relegation-threatened Norwich and West Ham in their two previous league games and lost the first leg of their Champions League last 16 tie to Atletico Madrid.
“What the boys did so far is exceptional but it is not over,” said Klopp.
“We did not expect the number of games we won. It was never easy and it will never be easy, so now let’s carry on.”
Klopp has long been an advocate of a winter break amid the gruelling English campaign to give his players a chance to rest and recuperate.
But a two-week break earlier this month appears to have disrupted the Reds’ rhythm.
“Shape, form is not something we can take for granted. We fought against each every feeling in the body. We fought against everything and that’s why we have that amount of points,” added Klopp.
“The biggest surprise for me is that Watford is fighting to stay in the league. Now is the moment when everybody is fighting like crazy.
“We don’t think it is the biggest catastrophe in world football. We feel the defeat really and now we have the chance to show the reaction again.”
Ismaila Sarr was the star for Watford as the Senegalese struck twice in six minutes at the start of the second half and then teed up Troy Deeney to add a third.
The comprehensive scoreline had the added bonus of edging Watford out of the relegation zone by one goal ahead of Bournemouth.
However, after slipping back into the bottom three following a fine start to his reign, Hornets’ boss Nigel Pearson is all too aware of the importance of backing up a famous win for the remainder of the season.
“It’s such an important win for us. But it is one win,” said Pearson.
“They are such an outstanding side, we had to get our performance right and I thought we thoroughly deserved the win.
“We threatened with the ball and defended with discipline, energy and commitment. That’s been the message from day one.
“It’s in our own hands, and we have to deliver that performance week in, week out.”
Ancelotti sees red in United draw
Elsewhere, Everton manager Carlo Ancelotti was sent off after approaching the referee as yet more VAR controversy contributed to a fiery finish in a 1-1 draw with Manchester United yesterday (Mar 1).
Goalkeeping errors by both United’s David De Gea and Everton’s Jordan Pickford were central to the outcome at Goodison Park.
But Everton thought they had won the game in stoppage time when a shot from Dominic Calvert-Lewin, who had opened the scoring, deflected off United’s Harry Maguire and into the net.
The goal, however, was ruled out by the video assistant referee with the offside Gylfi Sigurdsson, lying in the path of De Gea, deemed to have obstructed the view of the keeper.
Ancelotti was as unhappy as the home crowd on Merseyside, with the Toffees boss sent off after approaching referee Chris Kavanagh on the field after the final whistle.
“He sent me off the pitch but then after that I had a long conversation with him that I would like to keep private,” Ancelotti told Sky Sports.
“The goal (Calvert-Lewin’s disallowed shot) I think was a borderline situation.
“He (the referee) says that Gylfi (Sigurdsson) was offside but in our opinion he did not affect the vision of De Gea. It is difficult to decide but the game is finished, it is a draw and we played really well so we are happy.”
The red card means Ancelotti is in line for a touchline ban for Everton’s next match, against his former club Chelsea.
“I hope not because I did not disrespect the referee, he knows this,” said the Italian.
“If I have to be banned I will be in the stands at Stamford Bridge. It is not a big problem, honestly, we will prepare well for the game.”
The draw saw fifth-placed United miss the chance to cut the gap to Chelsea in fourth to a single point in the Premier League table as Everton stayed in 11th position.
“We should be leading at half-time," said United manager Ole Gunnar Solskjaer.
“Then they threw everything at us. But we should have won it with the chance at the end. I am pleased with a point.”
It took Everton just three minutes to break the deadlock with a bizarre goal that delighted the Goodison Park faithful.
There seemed little danger as De Gea dwelt on a clearance.
But his eventual kick downfield was blocked by the charging Calvert-Lewin, with the rebound flying into the unguarded United net.
De Gea did make amends in part by denying Calvert-Lewin a second goal by tipping a shot wide.
Another goalkeeping error helped United draw level in the 31st minute when England number one Pickford, with national manager Gareth Southgate watching from the stands, failed to cover Bruno Fernandes’ speculative, if well-struck, effort from long range.
Everton midfielder Sigurdsson went close to making it 2-1 early in the second half.
United’s Victor Lindelof carelessly gave away a free-kick on the edge of the box and Sigurdsson saw his curling strike come back off the post, with Richarlison unable to get the rebound on target as he followed up.
In the closing moments of normal time, Pickford blocked Fernandes’ initial shot and acrobatically dashed across his goal to keep out Odion Ighalo’s follow-up.
De Gea then saved from Sigurdsson before the replay row at the other end of the pitch, with Solskjaer saying: “What a great save. He makes amends there.”
In yesterday’s other Premier League game, Wolves continued their fine form, and their charge for a Champions League spot, by beating Tottenham 3-2 .
Jose Mourinho’s side led twice in north London thanks to goals from Steven Bergwijn and Serge Aurier.
But Matt Doherty got Wolves’ first before second half goals from Diogo Jota and Raul Jimenez overturned a 2-1 deficit in the second half.
It was a bitter blow for injury-hit Tottenham, who suffered three consecutive defeats in all competitions for the first time this season.
Wolves moved two points above Tottenham into sixth place in the Premier League, level with Manchester United and only three points behind Chelsea in fourth spot.