The 28-year old England midfielder came to Anfield from Chelsea last summer with big wraps but has failed to produce for his new club, making just 16 appearances and scoring two goals this season.
Dalglish admits it has been tough for the former West Ham United young gun but said his dedication is second to none and was delighted for him scored as a sub in the 5-0 win over Birmingham City on the weekend.
"You don't get anywhere if you don't work hard but you also don't get anywhere if you think you have arrived," said the Reds boss.
"Joe's dedication and application on the training pitch has been superb. This week Joe had a day off but he still came in to train.
"At the moment the lads are not doing too badly so it is difficult to give everybody a game, but if he'd been a defender he might have had a chance with the injuries we have had.
"But I think you insult the boy if you ask if he has the necessary desire.
"He came on and scored a goal (on Saturday) and we couldn't have asked for any more from him in training.