Goals from Roberto Firmino, Sadio Mane, Mohamed Salah and Daniel Sturridge saw Arsenal suffer a four-goal loss at Anfield, leaving the Gunners with just three points from their first three matches of the 2017-18 Premier League campaign.
Xhaka has insisted that the Gunners "have made progress" since last season, but the Swiss international has called the afternoon on Merseyside "a bitter defeat".
"We have made progress as a team since losing to Bayern last season. However against Liverpool we didn't show any signs of improvement," Xhaka told reporters.
"I include myself in this. We did a lot wrong, and failed to compete with Liverpool. You get days like this. You don't want it to happen, but if it has to be then I would sooner lose one game 4-0 than four matches by 1-0.
"We made a good start to the season against Chelsea in the Community Shield, then had a crazy game [4-3] against Leicester. We were unlucky to lose at Stoke despite clearly being the better side. We have to look back critically at the Liverpool game, but then forget it as soon as possible.
"We know we produced nothing at all, and it was a bitter defeat. It is not the start to the season that we had wanted. But we still have 35 league games to come."
Arsenal will look to bounce from the defeat to Liverpool when they host Bournemouth next weekend.