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Definitely keep applying elsewhere. If you had a good rapport with the recruiter and you want to stay in touch, that's good. Check in with them if you feel like it, but don't count on it leading to anything. It may, but you need to keep working on other opportunities.
I always feel like when they say that, it is a polite rejevtion. That being said, it wouldn't hurt to follow up. You never know and I think it is a good way to build a relationship with that recruiter.
I'm still waiting for that call from someone who said that they would "keep me in mind".