No, GF does not recommend using steel wool with water based finishes because the particles can become embedded and rust. Some alternatives that GF recommends are Klingspor's Synthetic Wool and Mirca Mirlon 1500 synthetic wool.
Oil Based Finishes:
Steel wool is still an acceptable option with oil finishes. GF recommends using oil free 0000 Wool from Liberon because it doesn't shred as easy as the hardware store brands.