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After making a bright start to the campaign, the Reds have slipped out of title contention recently and are currently 17 points adrift of leaders Arsenal.
"We're not good enough," Carragher told the Daily Star.
"It's not one particular 'this' or 'that'. It's just that other teams have been playing better than us.
"We've obviously got to improve both as individuals and as a team.
"If we can get a result against Chelsea we could maybe try to get on their heels in the table and start reeling them in."
Liverpool face the Blues at Stamford Bridge on Sunday.
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