It appeared the Minstermen were heading for three points as they continue their quest to finish in the top half of the National League North.
But their two-goal lead was squandered as the Pilgrims bit back at Bootham Crescent.
Watson spoke to the York Press after the game and said throwing away a strong half-time lead shows they have a lot of work to do.
“It felt like a defeat,” he told them. “We said at half-time that the game’s third goal would be vital, and we actually started the second half better than we did the first.
“With our position in the league now, we should be able to play with a bit of freedom and positivity.
“I counted six really, good chances to score or pick the right pass in the second half and nothing came from them
“The more the second half went on, the more frustrating it got.”
Watson wants York to end another tricky season in top half of the table.
They play FC United of Manchester on Tuesday, followed by a game at Guiseley.