The Red Devils were beaten 3-1 by the Hornets at Vicarage Road in what Scholes described as a 'poor' display from Jose Mourinho's men.
The former United star feels young striker Marcus Rashford was the only positive on what was an extremely discouraging day for the club.
"The quality on the ball is as poor as you will ever see from a Manchester United team," Scholes told BT Sport.
"But that's the way it is at the moment, you are not sure what you are going to get!
"Rashford is the only shining light really and he didn't have his best game. He looked a threat but in possession, United looked really, really poor.
"I think individually they were not good enough. In possession they were sloppy and giving the ball away all the time."
Etienne Capoue struck first for Watford in the 34th minute before Rashford replied for United just after the hour-mark but late goals from Camilo Zuniga and Troy Deeney did the damage for Walter Mazzarri's men.