The Toon have started the season poorly, losing to Tottenham 2-0 on the opening day and 1-0 to fellow promoted side Huddersfield yesterday.
Benitez has been vocal in his unhappiness at the transfer business he has been able to complete at Newcastle this summer.
But Carragher, who played under Benitez for six years whilst the Spaniard was at Liverpool, says his former boss is not going about it the right way.
The former England centre-back says his negative demeanour is rubbing off on his players and that needs to change.
“Rafa Benitez is a God really to Newcastle fans,” Carragher said on Sky Sports.
“They’re writing books about him, the way he brought them up, he’s integrated himself into the city with his work.
“But his negativity, I think, is rubbing off on the whole club.
“The supporters, all they’re chanting for is Rafa Benitez, there’s no players, so you can see how they feel about him but there’s got to be more of an upbeat mood.
“What he’s basically saying is the players he’s got aren’t good enough but 80-90 per cent of that squad, those are who you are going to need to keep you up.
“You need to somehow lift them as well, it’s far too negative and it has to change.”
Newcastle’s next league game is against West Ham this Saturday (3pm).