For Wolves, the 2-1 defeat was harsh as it could be argued that the Premier League relegation contenders deserved at least a point in the Second City.
But, despite his devastation, McCarthy acknowledges that a failure to defend to the final whistle and a blunt cutting edge cost his drop-zone occupants.
The Wolves boss told Sky Sports: "We conceded a couple of poor goals from our point of view but Birmingham, certainly Kevin Phillips, will see them as terrific goals.
"We should have done better in the first 10 minutes of the second half when we were on top and we had a couple of breaks and needed a second goal.
"We didn't get it and brought pressure on ourselves. We gave the ball away a bit too often and invited pressure."
McCarthy dryly continued: "I haven't found a good way to lose, I have to be honest.
"We weathered the first five, seven, eight minutes (of the match) and then I thought we played well.
"In the first 25 minutes of the second half I thought we were the better team and so to lose like that hurts even more."