The Reds opened the scoring at Whitley Park after just five minutes of the contest via Kareem Ahmed.
They held that advantage at the half-time interval, but three goals in the second half from the hosts consigned them to defeat.
Michael Mills initially levelled for the Magpies, before Kacey Wooster's double - the second of which came from the penalty spot - secured the home side the points.
Reflecting on the game, U18s boss Marc Bridge-Wilkinson told Liverpoolfc.com post-match: "We're disappointed to lose. I thought we played really well in spells although we still found a way to concede three goals in the second half, which is hard to take.
"There's lots of positives from the game but we need to start finding a way to make ourselves harder to score against and then with that take our chances in the opposition box.
"We just have to be harder to beat. It's a bit of a tricky spell at the moment. We're doing everything we can to learn the lessons required.
"There were a few U16s with us today and I thought the younger ones did really well. Hopefully the older ones in the team can help them and we can give them a platform moving forward."
Team
Hall, Lonmeni, Airoboma, Owen, Williams, Ayman, Upton, Bradshaw (Yeguo, 88), Martin (Onanuga, 73), Ahmed (O'Connor, 79), Sonni-Lambie.
Unused subs: Evers, Bernard.
Goal: Ahmed (5).
Next up
The Reds next return to action on Saturday March 1 at the Academy when they host Leeds United in an U18 Premier League North meeting.
Kick-off in Kirkby is at 12pm GMT and the game will be shown live on LFCTV GO.
